How a boat balloon works
Part of the borrowing is deferred to the end of the term as a balloon. You pay interest on the whole amount, but repay less capital each month, so the payment is lower than a full repayment loan.
At the end you either pay the balloon, refinance it, or sell the boat and settle it from the proceeds.
Worked example
Borrowing £60,000 at 8.5% over 10 years with a £24,000 balloon costs £604.04 a month. The total repaid is £96,484.49, of which £36,484.49 is interest.
Without the balloon the payment would be £733.87. The balloon saves £129.83 a month but leaves a large sum to find at the end.
The risk at the end
If the boat is worth less than the balloon when the term ends, you must cover the shortfall. Boats can depreciate slowly, but condition and the market matter.
Check that you can pay or refinance the balloon before signing, and ask what the lender charges if you settle early.
Inputs for the boat loan balloon calculator
Amount borrowed
How much you are financing after any deposit.
Interest rate (APR)
The rate on the agreement.
Term
How long until the balloon payment is due.
Balloon payment
The lump sum you will owe at the end, from your quote.
CALCULATOR QUESTIONS
Boat loan calculator with balloon questions
What is a typical boat balloon?
Often 30% to 50% of the amount borrowed, depending on the lender and the boat's expected value.
Is a balloon cheaper overall?
No. It lowers the monthly payment but you pay interest on the balloon for the whole term, so total interest is higher.
What if I cannot pay the balloon?
You would need to refinance it or sell the boat. If the sale proceeds fall short, you cover the difference.
Can I settle early?
Usually yes, but check for early settlement charges and how the rebate is calculated.