Get Interest Only Promissory Note With Balloon Payment

An interest-only note with a balloon payment allows borrowers to focus on paying interest for a set time before a large principal payment is due. This kind of structure can suit individuals who anticipate future earnings or a lump sum to help with the final payment. Choosing an interest only promissory note with balloon payment can be a strategic financial decision when executed thoughtfully.

The enclosed document has a specific term, during which the borrower must make regular, equal payments. At the end of that term, the borrower must pay any outstanding amounts due under the note. This last payment is sometimes called a “lump-sum” or a “balloon” payment.

Types of Promissory Notes Simple promissory note. Demand promissory note. Secured promissory note. Unsecured promissory note.

Lump-sum owned at the end of the loan term. Sometimes the lump sum cannot be financed. In the event of a default, you may end up selling the vehicle and still owning a large sum of money on it. Can create a cycle of more balloon payments and excessive debt if not managed well.

Bullet loan borrowers may be offered a zero payments option over the life of the loan or interest-only payments. Bullet loans require the borrower to make a large lump-sum payment at the end of their term.

Once the interest-only period ends, you'll have to start repaying principal over the rest of the loan term—on a fully-amortized basis, in lender speak. Today's interest-only loans do not have balloon payments; they typically aren't even allowed under law, Fleming says.

An interest-only secured promissory note is a loan that is secured with property and requires interest-only payments through the life of the loan, with a large balloon payment for the principal at the end of the loan term. This type of loan has benefits and drawbacks to consider.

A secured promissory note is an obligation to pay that is secured by some type of property. This means that if the payor fails to pay, the payee can seize the designated property to obtain reimbursement of the loan.

A Promissory Note with Balloon Payments is a loan contract that enables a lender set loan terms with one or more larger payments at the end. This lending document helps you to clarify the terms of a loan, define the payment schedule, and provide an amortization table, if the loan includes interest.