Disadvantages of Balloon Loans

Balloon loans are either the most brilliant or dangerous loan every created. Okay, they are probably both! The idea behind a balloon loan is short term flexibility. You essentially borrow a boatload of money on the cheap…for a bit. The loan comes in many forms. The most common is a version with the interest rate and monthly payment being very low. This lasts for three, five or seven years typically. At the end of that period, however, the loan comes due. Yes, all of it! Obviously, you can plan for this by refinancing the loan or selling the home. If you the house loose value during the term of the loan, however, you are in deep, deep, deep trouble.