Which of the following describes the nature of a balloon payment?

A balloon payment refers specifically to a lump sum payment that is due at the end of a loan term. This payment is typically larger than previous payments made during the life of the loan, which may have included smaller periodic payments. Such loans often have a shorter amortization period compared to their actual loan term, resulting in a smaller monthly payment followed by this significant final payment. This structure is commonly seen in certain types of financing arrangements, including some real estate and commercial loans. Understanding this concept is crucial, especially in real estate transactions, as it can impact the borrower's financial planning and cash flow at the conclusion of the loan term.