Balloon Interest

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Definition of 'Balloon Interest'

An increased coupon rate on the longer term maturity instruments within a serial bond issue. In a serial issue, bonds mature at different intervals, creating a string of short- to long-term instruments. Higher interest is earned on the long-term bonds, providing incentive to investors for holding the instrument for an increased period.
Investopedia Says

Investopedia explains 'Balloon Interest'

Investors refer to this large coupon rate as balloon interest, since it is often inflated. Serial bonds are usually issued to fund revenue-generating projects with steadily increasing cash flows. The issuer hopes that the project will be near the height of its earning power, by time the balloon interest is due.

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'Balloon Interest'

  • Home-Equity Loans: The Costs

    http://www.investopedia.com/articles/pf/05/041905.asp
    ... term of the loan, this balloon payment could be more than you can handle. If you
    take a home-equity line of credit, ask about the cap on the interest rate and ...

  • Interest-Only Mortgages: Home Free Or Homeless?

    http://www.investopedia.com/articles/mortgages-real-estate/08/interest-only.asp
    ... to stay with a payment plan can lead to overpaying the desired amount of interest.
    When the mortgage matures, the borrower risks owing a balloon payment that ...

  • Avoiding Foreclosure Scams

    http://www.investopedia.com/articles/pf/07/foreclosure_scam.asp
    ... Many times the loan's terms will include prepayment penalties, balloon or
    interest-only payments, huge fees and immediate rate adjustments. ...

  • Subprime Lending: Helping Hand Or Underhanded?

    http://www.investopedia.com/articles/basics/07/subprime_basics.asp
    ... Act, passed in 1982, enabled the use of variable-rate loans and balloon payments.
    Finally, the Tax Reform Act of 1986 eliminated the interest deduction for ...

  • 9 Reasons To Buy A House Now - Investopedia.com

    http://financialedge.investopedia.com/financial-edge/0511/9-Reasons-To-Buy-A-House-Now.aspx
    ... Rate Mortgages (ARMs) are also lower now, although there are risks that interest
    rates may increase over the life of the mortgage and the balloon payment due ...

  • How HELOCs Can Hurt You

    http://www.investopedia.com/articles/mortgages-real-estate/11/HELOCS-can-hurt-you.asp
    ... Borrowers who choose interest-only payments will face dramatically higher monthly
    payments later on, and possibly a balloon payment at the end of the loan term ...

  • How HELOCs Can Hurt You

    http://www.investopedia.com/articles/mortgages-real-estate/11/helocs-can-hurt-you.asp
    ... Borrowers who choose interest-only payments will face dramatically higher monthly
    payments later on, and possibly a balloon payment at the end of the loan term ...

  • The Fuel That Fed The Subprime Meltdown

    http://www.investopedia.com/articles/07/subprime-overview.asp
    ... to its peaks in 2005 and 2006, teaser rates, ARMs, and the "interest-only" loan ... would
    leave the borrower with an untenable combination of a balloon payment and ...

  • This ARM Has Teeth

    http://www.investopedia.com/articles/pf/07/arm-reset.asp
    ... If you don't pay at least that much, the interest is added to the loan ... You might
    change the mortgage into a fixed-rate loan or negotiate a balloon payment. ...

  • Business Owners: A Guide To Qualified Retirement Plan Loans

    http://www.investopedia.com/articles/retirement/03/071603.asp
    ... Each payment should include an allocation of principal and interest amounts. Generally,
    balloon payments are not acceptable for qualified plan loans. ...

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