Balloon payment calculator
A balloon payment lowers your monthly repayment by parking part of the loan at the end of the term. It is a genuinely useful tool — and an expensive trap if you do not plan for it. Slide the balloon up and down and watch both numbers move: the monthly repayment falls, but the lump sum waiting at the end grows.
What a balloon payment is
A balloon (also called a residual) is a portion of the loan you agree not to pay off during the term, settling it in one lump sum at the end instead. Because you finance a smaller balance over the term, your monthly repayment drops. The balloon does not disappear, though — you still have to pay, refinance or trade out of it when the loan matures.
The trade-off, in numbers
Take a typical five-year loan. With no balloon, you finish owing nothing and pay the least interest overall. Add a balloon and the monthly repayment falls noticeably — but you owe that lump sum at the end, and because you carry a larger balance for longer, the total cost rises. Use the calculator above to see exactly how far the monthly figure drops and what you would owe at the end as you change the balloon percentage.
These figures are illustrative only — not a quote or an offer of finance — and assume a fixed rate for demonstration. The point of the comparison is the shape: a balloon trades a lower monthly cost now for a larger obligation later.
When a balloon makes sense
Balloons suit borrowers with a clear plan for the residual — businesses matching repayments to the income an asset produces, or buyers who intend to trade or upgrade at the end of the term. They are riskier if you have no plan to clear the lump sum, because you may be forced to refinance at whatever rate is available then, or find the asset is worth less than the balloon owing.
Deposit: $5,000 · LVR 90%
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Frequently asked questions
What happens to the balloon at the end of the loan?
You have three choices: pay it out in cash, refinance it into a new loan, or sell or trade the vehicle and use the proceeds to clear it. If the vehicle is worth more than the balloon, you keep the difference; if it is worth less, you cover the shortfall. Having a plan for the balloon before you take it on is the key to using one safely.
How big can a balloon be?
Lenders cap the balloon, and the maximum usually depends on the loan term and the age of the asset — the longer the term or the older the asset, the lower the allowable balloon, because the asset will be worth less at the end. Commercial vehicles and trucks often have more conservative balloon limits than new cars.
Does a balloon save me money?
No — it lowers your monthly repayment but increases the total cost, because you carry a larger balance for longer and pay more interest. A balloon is a cash-flow tool, not a discount. Use the calculator to see the difference between the monthly saving and the total cost.
Can I make extra repayments to reduce the balloon?
With some loans, yes — extra repayments can reduce the balance and the interest, though the contracted balloon amount itself is usually fixed. The terms vary by lender, and we will confirm them before you commit.