FinanceQuestion 70 of 120
A loan feature that requires a large final payment at the end of the term, larger than the regular payments, is called a:
a.Fully amortized payment
b.Negative amortization credit
c.Prepayment penalty
d.Balloon payment
Explanation
A balloon payment is a large lump-sum payment due at the end of a loan whose regular payments do not fully pay off the balance. Balloon loans carry the risk that the borrower must refinance or pay the balance when due. They contrast with fully amortized loans that pay off completely.
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