A balloon loan has small payments and a big lump sum due at the end. FV computes that remaining balance — the balloon — after the scheduled payments.
The example
$100k at 6% with $600/mo, balloon after 5 years.
| A | B | |
|---|---|---|
| 1 | Item | Value |
| 2 | Monthly payment | $600 |
| 3 | Balloon (yr 5) | $74,000 |
The formula
The formula:
How it works
How it works:
FV(rate/12, periods, payment, −loan)projects the balance after the scheduled payments.- Because payments don’t fully amortize the loan, a balance remains — the balloon.
- Negate the result so the amount owed shows as positive.
- Set the payment lower than a full amortizing payment to create the balloon; an interest-only loan leaves the entire principal as the balloon.
Plan for the lump sum. A balloon keeps monthly payments low but requires refinancing, selling, or a large cash payment at maturity. Always know the balloon amount before signing.
Try it: interactive demo
Loan, rate, payment, years.
Variations
Payment for a target balloon
Solve PMT with FV:
Interest-only balloon
Whole principal:
Total paid
Payments + balloon:
Pitfalls & errors
Sign convention. Loan positive, payment negative (or use the leading minus on FV) so the balloon is positive.
Match the period. Monthly: rate/12 and years×12.
Know the lump sum. The balloon must be paid or refinanced at maturity.
Practice workbook
Frequently asked questions
How do I calculate a balloon payment in Excel?
How do I set a payment for a target balloon?
What is the balloon on an interest-only loan?
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