balloon note


A long-term loan, often a mortgage, that has one large payment (the balloon payment) due upon maturity. A balloon note will often have the advantage of very low interest payments, thus requiring very little capital outlay during the life of the loan. Since most of the repayment is deferred until the end of the payment period, the borrower has substantial flexibility to utilize the available capital during the life of the loan. The major problem with such a loan is that the borrower needs to be self-disciplined in preparing for the large single payment, since interim payments are not being made. Balloon notes are often undertaken when refinancing or when a major cash flow event is anticipated. also called bullet loan or balloon loan.

Use balloon note in a sentence

John Smith was worried about making his balloon note payment due in February after losing his job at ABC Company.

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You may want to try and take on a balloon note if you would rather just make one big payment then a lot of small ones.

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We negotiated a balloon note with the lender providing for interest only payments for the first seven years and payment in full at the end of the term.

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