BALLOON PAYMENT

A large final payment made at the end of a financial loan. Implemented to keep the monthly loan payments small to allow the business to use the difference for working capital until the final payment is due.

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When periodic payments are not sufficient to fully amortize the face amount of a note prior to maturity, so that a principal sum ("balloon") is due at maturity.

A large payment at the end of the loan allowing smaller payments to be made during the term.