A balloon (some lenders call it a residual) is a chunk of your loan you don’t pay off along the way — it sits there until the end, and you square it up as one final payment. Because your repayments only cover the rest of the loan, they’re lower every week.
How it works
Say you borrow $100,000 for a truck with a 30% balloon. Your repayments are worked out as if you were only paying off $70,000 of it — the last $30,000 is due in one hit on the final day of the loan. With no balloon, your repayments cover the whole $100,000, and on the last day you owe nothing.
A quick example — $100,000, 5 years, same rate
| 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 |
So the balloon version is about $92 a week easier on your cash flow — but it costs around $6,000 more in interest over the five years, because that $30,000 sits there the whole term collecting interest. Neither is “right” or “wrong”: it’s cheaper repayments now versus a cheaper loan overall. (Illustrative business-finance example only — not a quote or an offer of credit. Both loans use the same example rate, figures rounded; your actual repayments depend on the lender, your rate and your deal.)
Who can get a balloon?
It always depends on the lender and on your profile — but most of all it depends on the age of the asset. As a rule, the newer the asset, the bigger the balloon lenders will allow. And it’s your choice: if you qualify for one, you can take anything up to the lender’s limit — you’re not forced to take 30% just because that’s on offer. You can do 10% instead, or no balloon at all.
Here’s the thing though: only a handful of lenders will offer balloons on older assets. That’s another reason it pays to use a broker who knows exactly where to go — going it alone, or using a broker who doesn’t know the panel, could mean missing out on a much better structure for your business without ever knowing it existed.
What happens at the end?
When the balloon falls due, you’ve got options: pay it out and the asset’s yours outright, refinance it into a new loan, or trade the asset in and put its value towards the balloon (often as part of financing the next one). Worth having a rough plan for this before you sign, not on the last day.
Want to see it on your numbers?
If you want to see how a balloon would change your repayment, get a quote or give us a call on 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 versions side by side for your actual deal.
Have a question about your deal?