How the Partially Amortized Loan Calculator works
A partially amortized loan — commonly called a balloon loan — sets the monthly payment as though the debt would be paid off over a long schedule, such as 30 years, but the loan actually comes due much sooner, often in 5, 7, or 10 years. When the term ends, whatever principal is still outstanding is due in one lump sum: the balloon payment. This calculator applies the standard amortizing-loan formula to compute the payment, then finds the balance still owed at the end of the shorter term.
The formulas
For loan amount P, monthly interest rate i (the annual rate divided by 12), and n total months in the amortization period, the payment is:
PMT = P × i / (1 − (1 + i)−n)
After t months of payments (the actual loan term, in months), the remaining balance — the balloon payment — is the loan's future value minus the future value of the payments already made:
Balance = P(1 + i)t − PMT × [((1 + i)t − 1) / i]
If the interest rate is 0%, the payment formula reduces to PMT = P / n and the balance reduces to P − (PMT × t). The calculator assumes a fixed rate for the full term and end-of-month payments.
Worked example
Take a $300,000 loan at 6.5% amortized over 30 years but due in 7 years. The monthly rate is 0.065 / 12 ≈ 0.005417 and the amortization uses n = 360 months, giving a payment of about $1,896. After t = 84 payments (7 years), roughly $28,750 of principal has been paid down, leaving a balloon payment of about $271,250 due at the end of year 7 — still around 90% of the original loan, with about $130,500 of interest paid along the way.
Why the balloon stays large
Amortization is front-loaded with interest: on a 30-year schedule, the first several years' payments go mostly toward interest, so principal barely moves. Stretching the payment calculation over a long amortization period keeps the monthly payment low, but it also means very little of the balance is retired before a short term ends — which is exactly why the balloon payment can still be most of the original loan.
Planning around the balloon
Borrowers with a partially amortized loan generally plan to refinance, sell the asset, or pay off the balloon in cash before maturity. Because the balloon is a hard deadline rather than a gradual payoff, it is worth checking the projected balance well before the term ends, especially if refinancing depends on interest rates, property value, or lending conditions that can change.