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A balloon mortgage, by comparison, might have a five-year term and a 30-year amortization. You'll make the same payment every month for five years (60 months) that you would have made on the loan with the 30-year term. But after that, you'll owe all of the remaining principal.
Selling the vehicle is usually the most popular option for when your balloon payment is due. Selling the car will typically cover the cost of the balloon payment, at which point you can then buy a new car and apply for another loan. Trading in the vehicle works much like selling it.
A balloon payment is the final amount due on a loan that is structured as a series of small monthly payments followed by a single much larger sum at the end of the loan period. The early payments may be all or almost all payments of interest owed on the loan, with the balloon payment being the principal of the loan.
There are several options available to you when your balloon payment is due: Make the final car loan repayment. Arguably the most obvious option is paying off the the final loan balance owed using your own cash, giving you complete ownership of the vehicle. ... Sell the car. ... Trade in the car. ... Refinance.
This large amount is called a balloon payment, which pays down the remaining balance when the term ends. A balloon mortgage has a short term that does not fully amortize, but the payment is usually based on a 30-year amortization schedule. Balloon mortgages are usually associated with commercial real estate loans.