A balloon is part of your loan you don’t pay off along the way. It sits there until the last day, and you clear it as one final payment. Some lenders call it a residual. It’s the same thing.
A quick example: $100,000 over 5 years
Say you borrow $100,000 for a truck with a 30% balloon. Your repayments only cover $70,000. The last $30,000 is due in one hit on the final day.
| No balloon | 30% balloon | |
| Weekly repayment | $473 | $381 |
| Owing on the last day | $0 | $30,000 |
| Interest paid over the loan | about $23,000 | about $29,000 |
The balloon saves about $92 a week, but costs around $6,000 more in interest, because that $30,000 collects interest the whole term.
Illustrative business-finance example only, not a quote or an offer of credit. Same example rate, figures rounded. Your actual repayments depend on the lender, your rate and your deal.
What happens at the end?
- Pay it out and the asset is yours outright.
- Refinance it into a new loan, usually over a shorter term.
- Trade the asset in and put its value towards the balloon, often as part of financing the next one.
Have a rough plan before you sign, not on the last day.
When does a balloon suit?
- Good fit: you want lower repayments while a new truck or machine earns its keep, you upgrade every few years, or the asset holds its value well.
- Think twice: the asset loses value fast, you plan to run it until it’s worn out, or the business can’t easily absorb a lump sum.
See it on your numbers
Every Budget Finance calculator has a balloon slider built in. Try 0% against 20-30% and watch the repayment change. Use the car finance calculator, the truck finance calculator, or the calculators hub for anything else.
Want it on your actual deal? Get a quote or call 1800 958 510. We arrange balloon and non-balloon loans across our panel of 40+ lenders, most often on trucks and vehicles, and we’ll show you both side by side.
Common questions
Do you pay interest on a balloon?
Yes. The balloon is part of what you borrowed, so it collects interest for the whole term. The amount itself doesn’t grow: the figure at the end is the figure set at the start.
How big can a balloon be?
It depends on the lender and your profile, but mostly on the asset’s age: the newer the asset, the bigger the balloon allowed. You can take anything up to that limit, or none at all.
Can you pay a balloon off early?
In most cases you can pay out the whole loan, balloon included, before the end of the term. Check your contract first, because some lenders charge early payout costs.
What if you can’t pay the balloon?
Refinance it, sell or trade in the asset, or talk to the lender early about an arrangement. A missed balloon is a missed repayment like any other, so start planning about six months out.
Have a question about your deal?