Balloon Loan Calculator

The Balloon Loan Calculator works out the two payments that define a balloon loan: the relatively low monthly payment you make during the term, and the large final balloon payment that repays the remaining balance at maturity. It also shows a visual payment timeline, compares the loan against a fully amortized loan over the same term, and breaks down how much principal you actually pay off before the balloon comes due.

What is a Balloon Loan?

A balloon loan is a loan whose monthly payments do not fully repay the debt over the loan term. Instead, the borrower makes small regular payments — based on a long amortization schedule, or covering only the interest — and then owes one large lump sum, the balloon payment, when the term ends. Balloon loans are common in commercial real estate, business financing, and some auto and mortgage products, where they offer low payments to borrowers who plan to sell, refinance, or repay early.

Balloon Loan Formula

An amortized balloon loan uses two steps. First, the monthly payment is calculated as if the loan amortized over the full amortization term. Then the balloon payment is the balance still outstanding after the shorter balloon term.

Here P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), n is the number of months in the amortization schedule, and k is the number of months in the balloon term. For an interest-only balloon loan, the monthly payment is simply \( P \times r \) and the balloon payment equals the full original principal P.

Worked Example

Suppose you borrow $250,000 at 6.5% interest, amortized over 30 years but with the balloon due after 7 years:

• The monthly payment is calculated on the full 30-year (360-month) schedule, giving roughly $1,580 per month.
• After 7 years (84 payments), most of the principal is still outstanding, so the balloon payment is about $226,000.
• You paid low monthly payments for 7 years, but you still owe the vast majority of what you borrowed.

Balloon Loan vs. Traditional Loan

Pros and Cons of Balloon Loans

How to Use This Calculator

1. Enter the loan details: Type in the loan amount and the annual interest rate, and choose your currency.
2. Choose the structure: Pick Amortized (principal & interest) or Interest-Only, set the balloon term, and for amortized loans set the amortization term (often 30 years).
3. Click Calculate: The tool computes the monthly payment and the final balloon payment instantly.
4. Review your results: See the payment timeline, the comparison against a fully amortized loan, how much principal is left as the balloon, and the step-by-step math.

Frequently Asked Questions

What is a balloon loan?

A balloon loan is a loan with small regular payments for a set term followed by one large final payment, called the balloon payment, that repays the remaining balance. The monthly payments are usually based on a long amortization schedule, or cover interest only, which keeps them low while leaving a big lump sum due at maturity.

How is a balloon payment calculated?

For an amortized balloon loan, the monthly payment is calculated as if the loan amortized over the full amortization term. The balloon payment is the remaining balance after the shorter balloon term: B = P(1+r)^k − M × ((1+r)^k − 1) / r, where P is the principal, r is the monthly rate, M is the monthly payment, and k is the number of payments made. For an interest-only loan, the balloon payment equals the full original principal.

Why are balloon loan monthly payments lower?

The monthly payment is sized using a long amortization period, or it only covers interest, so very little or no principal is repaid each month. This makes the monthly payment much lower than a normal loan repaid over the same short term, but it leaves most of the principal to be paid all at once as the balloon.

What happens at the end of a balloon loan?

When the balloon term ends, the entire remaining balance is due in a single payment. Borrowers typically pay it in cash, refinance into a new loan, or sell the asset to cover it. If none of these are possible, the borrower can default, so a clear plan for the balloon payment is essential before taking the loan.

What is the difference between an amortized and an interest-only balloon loan?

An amortized balloon loan repays a small amount of principal with each monthly payment, so the balloon is somewhat smaller than the original loan. An interest-only balloon loan pays only interest each month, so the balloon payment equals the full original principal. Interest-only loans have the lowest monthly payment but the largest balloon.

Are balloon loans a good idea?

Balloon loans can suit borrowers who expect to sell, refinance, or come into money before the balloon is due, or who want lower payments in the short term. They carry real risk: if you cannot make the balloon payment you may have to refinance at a higher rate or default. They are best used with a concrete exit plan.

Additional Resources

• Balloon Payment Mortgage - Wikipedia
• Amortization - Wikipedia