Balloon Payment
What Balloon Payment means
A large lump-sum payment due at the end of a loan tenure, with smaller-than-normal EMIs during the repayment period. Common in vehicle and commercial loans.
Example
A 3-year vehicle loan may require 36 EMIs of ₹8,000 followed by a balloon payment of ₹1.5 lakh; plan a separate savings pool for the final payment.
This definition is based on RBI – Master Direction on Non-Banking Financial Companies ↗. We link every figure to its primary source — see our data methodology.
Related repayment terms
- AmortisationThe gradual repayment of a loan through regular EMIs, where each payment covers the interest accrued for that period plus a slice of outstanding principal. Early EMIs are mostly interest; later EMIs are mostly principal.
- Amortisation ScheduleA month-by-month table showing how each EMI is split between interest and principal, along with the outstanding balance after every payment.
- DisbursementThe actual release of sanctioned loan funds — to the borrower's bank account or directly to the seller, builder, or institution. Interest accrues from the disbursement date, not the sanction date.
- EMIA fixed monthly payment combining both the interest charges for the period and a portion of principal repayment, calculated so the outstanding balance reaches zero by the last instalment.
- ForeclosureFully closing a loan account before its scheduled maturity by paying off the entire outstanding principal in one lump sum. RBI prohibits foreclosure charges on floating-rate retail loans.
- MoratoriumA lender-approved temporary suspension of loan repayments during which no EMIs are due. Interest continues to accrue on the outstanding principal and is either added to future EMIs or extends the tenure.