Accurate Balloon Payment Calculator

Balloon loan - a whimsical name don't you think for a potentially risky financial product?

What is a balloon loan?

Balloon payment calculator solves for the periodic payment amount or final balloon payment amount. Create schedules with dates. Supports extra payments.

• Solves for 5 unknowns.
• Supports extra payments and user selectable dates.
• Creates a printable payment schedule.
• Now export to XLSX/DOCX files.

You can structure a loan to meet your specific needs.

Click to Try It Now!

A balloon loan has its regular, periodic payment calculated using one term (say 30 years) when the last payment is due sooner (say in 7 years).

Wikipedia defines a balloon loan or mortgage as a loan:

which does not fully amortize over the term of the note, thus leaving a balance due at maturity. The final payment is called a balloon payment because of its large size.

This Balloon Loan Calculator will not only calculate the final balloon payment, it will also help you structure a loan to meet your exact needs.

Check out these additional loan scenarios:

• Want to know what periodic payment will result in a specific final balloon amount? This calculator will calculate the regular payment.
• Or do you need to set the regular payment to an agreed upon, but nontraditional amount before calculating the balloon? This calculator is capable of doing that calculation as well.
• Or do you have a budget for both the periodic payment and the balloon payment and you want to know how much you can borrow? This calculator can use your inputs to calculate the loan amount.
• Or do you want to lower the periodic payment even further? Then select interest-only payments.
• Or do you want to calculate the periodic payment using say a 30-year term while the balloon is computed using a 7-year term? Yup, you can do that calculation too. See "Doing the Two-Step" below

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Pick a Date

As mentioned, a balloon loan is a loan that has its regular periodic payment calculated using one term (say 30 years) when the last payment is due sooner (say in 7 years).

If you do not know the amount of the regular loan payment, then we must calculate it before we can calculate the final balloon amount.

Example: Assume you are considering a mortgage for $146,500. You want the monthly payment calculated based on a 30-year loan, but you'll pay the balance after 72 months.

Doing the Two-Step

Step 1: Enter:

When you enter "0" for both "Periodic Payment" and "Final/Balloon Payment," you are setting up the calculator to calculate a level payment for the entire term of the loan. That is the final payment will not be a balloon payment.

Click "Calc" and here are the results. $737 is the "regular" payment amount for a 30-year loan. (The final payment gets rounded by less than $2.00 or less than $0.01 per each regular payment.)

Step 2: Now to calculate the balloon payment amount, with the balloon due after six years, set the calculator as follows:

Click "Calc," and this is the balloon that will be due in the final month of the sixth year if the debtor makes payments based on an assumed term of 30 years:

If that's what you wanted to know - what the balloon payment amount will be for a loan, then you're finished.

But with this calculator, it's possible to do more. You can structure a loan, just the way you want it.

Other scenarios - very flexible!

Example 2: Pick the balloon payment amount and calculate the periodic payment:

Example 3: Pick any periodic payment amount:

Example 4: Pick your payments and see what you can borrow:

The calculator's support for extra payment is very flexible. First, you'll notice the calculator prompts you for "Extra Payments Start?" date. You can, therefore, schedule extra payments between the regular due dates if doing so is better for your cash flow.

As mentioned elsewhere, the calculator allows for a one-time extra payment or for multiple extra payments. The multiple extra payments can be for 2 or any number up until the loan is paid-in-full. (In that case, set the number of extra payments to "Unknown.")

When the extra payments are "off-schedule," the calculator prepares an expanded report, showing the payment being applied 100% to the principal with interest accruing.

This is the correct way to apply the payment - something that other online calculators don't usually handle properly. That is if they even let you plan for extra payments between regular payments.

Most frequently, the periodic payments get allocated to both principal and interest. Thus with each payment, the loan balance is being reduced.

But what if the borrower wants to pay even less per period?

If that's the case, the lender may agree to make the balloon loan one where the borrower pays only the interest due on each payment date. Paying only the interest each period reduces the payment amount even more for the borrower.

This calculator supports interest-only payments (select the option under "Amortization Method"). If you select it, however, the calculator works slightly differently.

• First, the balloon payment will always be equal to the loan amount. Therefore, it isn't possible to solve for the balloon payment.
• Or looked at in a different way, the user cannot provide a periodic payment amount. The calculator will always calculate the regular payment amount since it is the interest due.
• When introducing extra payments into the interest-only cash flow, the calculator's main window shows the amount of the first interest-only payment. But after each prepaid principal amount, the subsequent payments will be reduced since prepaying lowers the loan balance which, of course, reduces the interest due.

Given the above, if you select interest-only, in almost all cases, to use the calculator, you'll want to set both of these inputs to 0.

As the day winds down, I go cross-eyed looking at columns of numbers. That's where cash flow charts come in handy. You can quickly learn the relationship between the principal, interest and optional extra payments.

This calculator creates 3 charts.

• The annual chart compares total interest and principal paid each year.
• The accumulated chart shows the amounts allocated to the principal and interest since the start of the loan.
• The pie chart clearly shows the relationship between total interest and principal with calculated percentages.

Bloggers, feel free to use these charts to make your point. Click for several export options.

Should I take out a balloon loan? There's Risk!

Balloon loans have their advantages. The borrower gets to borrow a large amount, for a short period, while making relatively small periodic payments.

However, the borrower should only consider this loan type if they are confident that they'll have the funds available or that they'll be able to refinance the loan in time to make the balloon payment when it comes due. Otherwise, the borrower will most certainly default on the terms of the loan, and they risk ruining their credit rating.

What do you think? Is a balloon loan a useful financial product? Or are you an issuer of these loans? If so, do you have anything to add to the above?

You can leave your comments and questions below.