Balloon Payment Meaning
A balloon loan payment is a huge amount due, at the end of a balloon loan, such as a mortgage, a trade loan, or another type of amortized loan payment. So, it is considered similar to a bullet repayment.
What is a balloon loan payment? A balloon loan payment is set up for a relatively short term period, so, only a portion of the loan’s principal amount is amortized over that period. The amount at the end of the payments, in such a case, is zero. Therefore, balloon loans payment is different from most lending systems taught to the public. Because it involves lower monthly payments with a large payment at the end of the term. But these loan payment terms are reduced than traditional loans and offered as for auto loans, mortgages, and business loans. Thus, the unpaid balance and due payment will be filled at the term’s end.
Similarly, it can help in lower interest rates and allow you to make lower monthly payments so the loan doesn’t affect your monthly cash flow. But focus on the total amount payment that you have to pay once your loan’s term is over.
How to Create a Balloon Loan Payment in EXCEL
This Template can be useful as a mortgage calculator, particularly for calculating the balloon payment. Similarly, there are many other expenses associated with home buying/selling that the calculator does not take into account, such as property taxes, deposit payments, mortgage insurance, owner’s insurance, closing costs, etc.
So we have created this spreadsheet to figure out a payment schedule for a home loan or auto loan. Why? To keep the monthly loan payments low at first, we set up a 2-year loan with the plan to pay the loan off completely after about 12 months.
Insert your Balloon Payment Data.
The columns include:
- Loan Principle Amount- Amount of your loan in the Loan Amount field
- Annual Interest Rate- Bank/financial institution offered interest per year
- Payment Period- Period of your amortization, commonly it is longer than the payment period
- Total Payment- Number of instalment months that you plan to pay before paying the remaining balance off.
- And Key Financial Data
- Overall Monthly Payment
- Total Interest
- Total Balloon Payment