What Is a Balloon Payment?
November 1, 2026 · 3 min read · Equipment Funding Network
A balloon payment is one large lump sum due at the end of a loan, after a series of smaller monthly payments that did not pay off the whole balance. It lowers what you pay each month and raises what you pay in all, and the lump sum still has to come from somewhere when the term ends.
To see a payment with no balloon, use the equipment payment calculator.
Looking at your own deal? See Commercial Truck Financing, Commercial Truck Financing in Georgia and Commercial Truck Financing in Illinois.
A worked example
Numbers for illustration only, not a quote: borrow $100,000 over 60 months at an example rate of 10%. With no balloon, the payment is $2,125 a month and you pay $127,482 in all. With a $20,000 balloon, the payment drops to $1,866 a month, and you pay $131,986 in all, including the $20,000 at the end. So you save $258 a month and pay $4,504 more overall.
Why it costs more
You are borrowing the balloon amount for the whole term and paying interest on it every month, because the monthly payments never touch it. That is the trade: more room in the monthly budget now, and more cost overall.
Who it fits, and the risk
- It can fit a business expecting a known lump of cash, like a contract that pays at the end, or one that plans to sell the equipment before the balloon comes due.
- The risk is the last day. If the cash is not there, you may have to refinance or sell the equipment under pressure, on terms you did not choose.
- Ask what happens if you cannot pay the balloon, and whether you can pay it down early without a penalty.
A balloon is not the same as a lease buyout
On a loan with a balloon, you owe the lump sum. On a fair market value lease, the amount at the end is a choice: you can buy the equipment, or hand it back. If you are weighing those, compare the totals, not just the monthly payments.
Where EFN fits
EFN is not a lender, and it does not approve or fund deals. You describe the equipment and the business in one short application, and the first step is a soft credit pull that does not affect your score. A person then compares your deal with what each lender says it will finance. The lender decides what structures it offers and sets the terms. A person reviews every file before it goes to a lender, and it goes to one lender at a time, not out to a list. If nothing fits, we tell you so. EFN's service is free to you.
To start, fill out the funding request on this site. It takes about five minutes, and it does not commit you to anything.
Common follow-up questions
Are balloon payments common on equipment loans?
They are less common than a loan with level payments, but some lenders offer them, and they often come up when someone asks for a lower payment. Ask the lender before you assume either way.
Can I refinance a balloon payment?
Often, but it is never guaranteed. A lender will look at your credit, your business and what the equipment is worth on that day, so do not plan on it as your only way to pay.
Is a balloon the same as a down payment?
No. A down payment comes at the start and lowers what you borrow. A balloon comes at the end and is money you borrowed all along.