Balloon payment loan meaning

A loan that requires a balloon payment is:

  1. fully amortized
  2. not fully amoritized
  3. also known as a seller carryback loan
  4. contingent upon buyer financing

Explanation:  The answer here is “a” – “not fully amortized”.  A fully amortized loan, by definition, is a loan in which all of the payments to pay off the loan are of equal value – so, for example, if you were paying off a $6,000 loan by paying $500 every month for a year then that loan would be fully amortized.  A balloon payment, by definition, is any payment more than double the usual amount.  Thus, a loan that requires a balloon payment (also known as a balloon loan) is not fully amortized.