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Part 2-Balloon payment

A balloon payment is a lump sum paid at the end of a loan's term that is significantly larger than all of the payments made before it.

On instalment loans without a balloon option, a series of fixed payments are made to pay down the loan's balance.

Balloon payments allow borrowers to reduce that fixed payment amount in exchange for making a larger payment at the end of the loan's term. In general, these loans are good for borrowers who have excellent credit and a substantial income.