Posted On: September 2, 2010

What is a Balloon Payment

A Sacramento bankruptcy attorney describes the balloon payment...

A balloon payment is a large, lump sum payment. It is made either at specific intervals, or, more commonly, at the end of a long-term balloon loan. Balloon payments are most commonly found in mortgages, but may be attached to auto and personal loans as well.

In exchange for this large final payment, the person taking out the loan reaps of a number of benefits. Usually, the initial amount of cash which must be put down is less than it would be under a standard loan agreement. More importantly, however, this type of loan often has a lower interest rate throughout the life of the loan and smaller monthly payments.

Balloon loans are ideal for people with good investment sense, and the ability to wisely manage and ration their spending. By freeing up capital that can be dedicated to paying down higher interest rates and making larger payments, balloon loans give a savvy investor the opportunity to use that capital to save money. These loans make a lot of sense for individuals expecting a financial windfall at some point in the future. This might be due to a large tax refund, an inheritance, or an expected dividend. Whatever the source, if current cash-flow is not indicative of future capital holdings, a balloon payment may be an intelligent choice.

Most lenders will want some sort of assurance that the final capital for the balloon payment will appear, although some lenders are more free with the granting of balloon loans. It is imperative, if a large sum of money is not expected to appear, that the borrower pay careful attention to setting aside a minimum amount each month to guarantee he or she will have the money when the balloon payment comes due.

If you have questions regarding bankruptcy in the greater Sacramento area , please contact our Sacramento Bankruptcy Attorneys at (916) 492-6025 or (1800) 941-6730 for a free consultation or visit and request a free face to face appointment in a Bankruptcy Law Firm office location nearest you. Our team of Bankruptcy Lawyers, Bankruptcy Client Care Specialists and Bankuptcy staff supporting Sacramento and Roseville consumers in debt can assist you with all aspects of your bankruptcy or bankruptcy litigation case. If you have questions about filing a Chapter 7 bankruptcy, a Chapter 11 bankruptcy, a Chapter 13 bankruptcy, or would like to learn more about bankruptcy litigation, legal debt settlement, mortgage modification, lien stripping, cram down, stopping a foreclosure, wage garnishment, asset protection, discharging a debt, etc. we can help! We have bankruptcy attorneys located throughout California and Oregon who can assist you with all of your debt resolution questions. Please feel free to complete our free online bankruptcy evaluation and we can quickly determine if you are a qualified candidate for bankruptcy. We look forward to hearing from you, Sacramento and Roseville!

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