Authoritative data source & methodology

AuthoritativeDataSource: Consumer Financial Protection Bureau (CFPB), “Paying Back Your Loan” guidance and lender disclosure standards (Regulation Z, Truth in Lending Act, 12 CFR Part 1026), latest consolidated version. All computations follow time-value-of-money identities used broadly in banking and finance.
Tutti i calcoli si basano rigorosamente sulle formule e sui dati forniti da questa fonte.

The formula explained

For a loan with principal $P$, periodic rate $i$ (APR converted to per-period), number of periods $n$, and a balloon $B$ due at maturity, the present value identity is:
$$P = A \cdot \frac{1-(1+i)^{-n}}{i} + \frac{B}{(1+i)^n}$$ Solving for the regular payment $A$: $$A = \left(P - \frac{B}{(1+i)^n}\right)\cdot \frac{i}{1-(1+i)^{-n}}$$ Special case if $i=0$: $$A = \frac{P - B}{n}$$

Glossary of variables

  • P — Principal (original loan amount).
  • APR — Annual Percentage Rate (nominal, not including fees).
  • i — Periodic interest rate ($i=\text{APR}/m$ where $m$ is payments per year).
  • n — Total number of payments (term × payments per year).
  • A — Regular payment per period before the final balloon.
  • B — Balloon (lump sum) due at maturity.
  • Total interest — Sum of all periodic interest plus any interest implicit in the balloon.
  • Total cost — Principal plus total interest.

How it works: a step-by-step example

Inputs: P = $25,000, APR = 6.5%, Term = 5 years, Frequency = monthly, Balloon = 40% of principal ($10,000).

  1. Payments/year $m=12 \Rightarrow i=0.065/12$.
  2. $n=5\times 12=60$.
  3. Discount the balloon: $B/(1+i)^n$.
  4. Compute $A = \Big(P - B/(1+i)^n\Big)\cdot \dfrac{i}{1-(1+i)^{-n}}$.
  5. Schedule shows 60 regular payments and a final line for the balloon $B$.

Frequently asked questions

Is the balloon included in the regular payment?

No. The balloon is a separate lump sum due at maturity in addition to the regular payments.

Why is total interest often higher with a balloon?

More principal remains outstanding for longer, so interest accrues on a larger balance.

Can I model a 0% APR balloon?

Yes. The payment becomes (P − B)/n and the balloon is paid at the end.

What balloon percentage is typical?

Auto/commercial loans often range 20–50%, but it depends on collateral, credit, and lender policy.

Does late payment change the math?

Some lenders accrue daily interest. Always check your agreement; results here assume a nominal APR per fixed period.

Tool developed by Ugo Candido. Content verified by the CalcDomain Editorial Board.
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