Know the Figures

Balloon Payment Loan Calculator

The monthly payment, the lump sum due at the end, and what the lower payment costs.

Replaces: Equipment-finance broker quotes

How to use it

Enter the amount financed, the quoted rate, the term, the balloon as a share of the amount and any up-front fees. The calculator works out the level monthly payment that leaves exactly the balloon outstanding at the end, then compares it with a loan repaid in full over the same term.

Where the number comes from

  • The balloon is the amount financed × the balloon percentage.
  • The monthly payment is the level payment whose present value, plus the present value of the balloon, equals the amount financed at the quoted rate ÷ 12. At 0% it is simply the amount less the balloon, divided by the months.
  • Total interest is all the payments plus the balloon, less the amount financed. The comparison loan uses the standard amortisation formula with no balloon over the same term.
  • The effective APR treats the fees as paid out of the advance: it is the monthly rate at which the payments and the balloon are worth exactly the cash received, × 12.
  • The schedule adds up each year’s payments and splits them into interest on the outstanding balance and principal repaid. The last closing balance is the balloon.

What goes wrong

The part most calculators leave out.

  • The balloon is assumed to be paid on time in cash. If it is refinanced, the cost of the new borrowing is not included, and on a short term it can exceed all the interest shown here.
  • A fixed rate is assumed throughout. On a variable-rate facility both the payment and the interest change, though the balloon itself usually does not.
  • Some agreements set the balloon as a fixed sum or a guaranteed future value rather than a percentage. Enter the percentage that reproduces the sum in your agreement.
  • Mileage, usage or condition clauses on asset finance can add charges at the end that the balloon figure does not show.
  • The effective APR follows one convention — the monthly rate × 12 with fees counted up front. A statutory APR disclosure may include different fees or compound the rate, so it may not match exactly.

A 30% balloon on 120,000 of equipment

A business finances 120,000 of equipment over 48 months at 8.5% with a 30% balloon. The payment is 2,325.46 a month, and 36,000 is due in one sum at the end. Against a loan repaid in full over the same term, the balloon saves 632 a month — but total interest comes to 27,622, which is 5,648 more, because the 36,000 is never paid down. With 1,500 of fees the effective APR is 9.04% and the credit costs 29,122 in all.

Questions

What is a balloon payment?
A lump sum due with the final instalment. The regular payments only repay part of the loan, so they are lower than on a loan repaid in full over the same term, and the rest is settled at the end.
Why does a balloon loan cost more interest?
Because the balloon part of the balance is not paid down during the term. Interest is charged on the outstanding balance every month, and with a balloon that balance stays higher for longer.
What happens if I cannot pay the balloon?
It usually has to be refinanced, the asset sold, or both. Refinancing depends on the rates and lending conditions at the time, which is the main risk of the structure: the payment you can afford today says nothing about the terms available in the final month.
Is a balloon the same as a residual value on a lease?
The arithmetic is the same — a lump sum at the end that lowers the regular payments. The difference is ownership: under a balloon loan you owe the sum; under some leases you may choose to pay it or return the asset.
Does anything I type get sent anywhere?
No. The whole calculation runs in your browser. Nothing is sent to us or logged, and there is no account to create. Your browser keeps the figures with this tab’s history so that Back and Reload bring them back, and Reset clears them.

Last updated .

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