balloon payment

Definition

A large, final payment due at the end of a loan term that covers the remaining principal balance. Named for its tendency to inflate your anxiety levels right before it's due.

Example Usage

Sure, the monthly payments are low, but that $50,000 balloon payment in five years might be a problem.

Origin

First used in American finance in the early 1900s, referencing the visual of an inflated balloon

Fun Fact

Balloon mortgages were common before the Great Depression and contributed to the housing crisis when borrowers couldn't refinance.

Source: Mortgage financing terminology

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