What is the characteristic of balloon debt?

Balloon debt is specifically characterized by having a large final payment due at maturity. This means that, during the term of the loan, the borrower typically makes smaller or interest-only payments, with the understanding that a substantial principal amount is due when the debt reaches maturity. This structure can be advantageous for borrowers who might anticipate improved cash flow over time, allowing them to manage smaller payments initially while planning for the larger lump sum at the end.

This characteristic makes balloon debt distinct from other types of debt that might require consistent, regular payments throughout the loan term or are unable to escalate suddenly to a large final payment.