A balloon payment is a final loan payment much bigger than the regular payments before it, because the loan was amortized over a longer period than its actual term. Seller-financed notes often use one to shorten how long the seller carries the loan. The buyer usually plans to refinance or sell before the balloon comes due.
Why it matters
A balloon payment sets the date you actually get paid off in full, which is not the same as the note's amortization period.