Loan mechanics
Balloon payment
A large final payment due because the loan did not fully amortize
The loan is amortized on a long schedule but matures early, leaving a substantial balance due in one lump. The borrower typically has to refinance or sell to meet it, which is where the risk sits.
How the exam asks about it
A partially amortized loan is precisely the one with a balloon at the end. Fully amortized means no balloon.
Related terms
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