Glossary
Balloon payment
A large lump sum due at the end of some car loans. It keeps regular payments lower during the term but leaves a big amount to clear at the finish.
By Leverage Finance · Updated 17 July 2026
A balloon (or residual) structure sets aside part of the loan to be paid in one final instalment. Regular payments only amortise the rest, so they're smaller, but the lump sum at the end can run to thousands, and interest accrues on it throughout the loan.
Balloons are common on dealer finance for newer cars. When one falls due, people typically pay it in cash, sell the car, or refinance the balloon into a normal amortising loan. If a balloon is approaching and the cash isn't there, refinancing it early, on your timetable rather than the due date's, is often the calmer path.
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