Balloon loans are another type of loan which not many people have actually heard of. It will come as no great surprise to you that these loans are not that popular however when you realise that whilst you do pay small amounts each month to start with, this is only for a certain time period and then you have to pay the rest of the money you owe in full.

Usually a balloon loan refers to a mortgage and the main advantage is that the interest rates are extremely low. This is what draws many people in, but the fact that the full amount is then due in a few years time. It is a long term payment plan but there is still that large lump sum at the end to pay and unfortunately most people are no good at saving their money. If you do not have that large sum of money at the end of the period you could end up in a lot of debt!

So, whilst the interest rates may be extremely low to start with, unless you can afford a large lump sum at the end of the payment period, it is advised that you do not take out this kind of personal loan. If you can afford it then obviously taking advantage of the low interest rates is definitely a great idea!