A balloon payment is a big final payment that comes due when a loan's term ends before it has fully amortized. The monthly payments are calculated as if the loan were spread over a long period, say 30 years, but the loan actually matures in a much shorter one, often five to seven years, leaving a large chunk of principal owed all at once. That lump sum is the balloon.
Balloon structures are common in commercial and some seller-financed deals because they keep monthly payments manageable. The catch is the maturity date: you must be ready to pay off, refinance, or sell before the balloon comes due, and if credit tightens or values fall at the wrong moment, refinancing may be hard. Never take a balloon loan without a realistic plan for the day it matures.