Balloon loans are short-term fixed rate loans that have fixed monthly payments based upon a 30-year fully amortizing schedule and a lump sum payment at the end of its term. Usually, they have terms of 3, 5, or 7 years.The advantage of this type of loan is that the interest rate on balloon loans is generally lower than 30- and 15- year mortgages resulting in lower monthly payments. The disadvantage is that at the end of the term you will have to come up with a lump sum to pay off your lender, either through a refinance or from your own savings
