Unlike a traditional loan where its total cost is amortized and paid incrementally during the life of the loan - a balloon loan does not fully amortize over its term. Balloon loans can give borrowers the flexibility for payments on principal, interest, or both to be deferred for a specified period. This results in the majority of the payments being compressed on the back end of the loan term.
LoanCirrus’ Balloon Loan feature gives lenders the flexibility to create flat or declining interest rate balloon loan products. This flexibility also extends to the aspects of the loan that will be deferred for a specified period. Therefore, lenders can choose to defer either interest, principal, or both interest and principal payments for a specified period before the end of the loan.
For obvious reasons, it is important to note that the maximum balloon term cannot be equal to or greater than the repayment term of a balloon loan being processed for a client.