FinancingQuestion 79 of 120
A loan with small periodic payments and one large final payment due at maturity contains a:
a.Prepayment penalty
b.Subordination clause
c.Balloon payment
d.Due-on-sale clause
Explanation
A balloon payment is a large lump-sum payment due at the end of a partially amortized loan. The periodic payments do not fully retire the principal, leaving a substantial balance owed at maturity. Borrowers often refinance to satisfy the balloon.
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