Putting it in the simplest terms, a balloon payment is a large, one-time payment due at the end of a loan term after a series of smaller regular payments. It is commonly found in loans with shorter terms or lower payments per month, such as some mortgages or auto loans. The balloon payment can be larger than previous payments, so borrowers need to plan for it in advance. Sometimes, borrowers refinance or sell the financed asset to cover the balloon payment, as it can be a significant expense.