A basic principle of loan payment involves making regular, consistent payments—usually monthly—to eventually pay off the loan entirely. How much and how often you pay is decided between you and the lender.

However, there are a variety of ways to make loan payments, including a balloon payment.

What is a Balloon Payment?

If you and your lender decide to go with a balloon payment option to pay off your loan, your monthly or regular payments will be relatively low and inexpensive. Then, at the end of your loan’s term, you’ll pay a substantial amount that will pay off the loan entirely.

Your regular payments will have contributed to decreasing the overall lump sum of the final payment, but ultimately, you’ll end up paying a large amount at the end.

When Are Balloon Payments a Good Idea?

If you have a lot of outstanding debt you need to pay off but don’t have the cash flow to get it done in regular, fixed rate payments, a balloon payment might just be the best option for you.

One of the best advantages a balloon payment can offer is its generally lower interest rates. These low rates allow you to make smaller payments. In addition, you might qualify for a larger loan amount with a balloon payment than you would with a fixed-rate loan.

For more information about balloon loans and other types of loans, visit LiftCredit.com. We’ll help you find the best financial options for you that suit your individual needs.