Financing
Enter your loan amount, APR, amortization term, and when the balloon is due. See your reduced monthly payment and the exact lump sum you'll owe.
How it works
Step 1
The amortization term determines your regular payment size, even though you won't actually pay for that many years. Confirm this structure clearly in your loan documents, since it's easy to confuse with the actual loan length, and compare it against a standard term using the loan term comparison tool.
Step 2
Most balloon solar loans set this at 5 years. Confirm the exact year in your agreement, and be clear on what funding source is actually expected to cover the balance, since a tax credit refund is no longer a given for a new system.
Step 3
Have a specific, realistic source of funds identified for the balloon payment before signing. If refinancing is your backup plan, the refinancing solar loan calculator shows what that might look like.
Your regular monthly payment is calculated as though you're paying off the loan over the full amortization term, say 20 years, which keeps that payment relatively low. But instead of continuing for the full term, the entire remaining balance comes due as a single lump sum at a much earlier point, often 5 years in. On a $28,000 loan at 6.99% APR with a 5-year balloon, that lump sum runs about $24,148, since so little principal has been paid down by then. Before you sign a loan, the Consumer Financial Protection Bureau's report on solar financing is worth reading for its findings on dealer fees and loan terms.
Older balloon structures were often paired with an expected tax credit refund, timed so the borrower applied that refund toward the balloon payment. That specific pairing no longer works for a system installed in 2026, since no federal credit currently applies to a new purchase. If you're relying on some other future source of funds, such as a bonus or the sale of an asset, that plan still carries the same risk if the funds don't materialize on schedule. The IRS Form 5695 instructions confirm the current eligibility rules if a carried-forward credit is part of your specific plan.
If the expected source of funds for the balloon payment doesn't materialize on time, whether that's a bonus, proceeds from selling something else, or a carried-forward tax credit that turns out smaller than expected, you're left needing to refinance the remaining balance or come up with the lump sum some other way. That makes a balloon loan meaningfully riskier than a standard fixed-term loan, where the payment schedule doesn't depend on a specific future event. If a carried-forward credit is part of your plan, the carried-forward credit tool can help confirm the actual amount before you count on it, and the total cost of ownership calculator shows the full picture if that plan changes.
A standard 5-year loan on the same $28,000 balance would carry a monthly payment of roughly $554, much higher than the balloon structure's regular payment, but it avoids the lump sum entirely and typically accrues less total interest since the balance amortizes fully within the shorter window. Compare both structures directly using the loan term comparison tool.
Ask specifically what happens if the balloon payment isn't made on time, whether refinancing is guaranteed or subject to new credit approval, and whether any fees apply to that refinance. Treat a balloon loan as a plan with a hard deadline, not just a low monthly payment, and use the refinancing solar loan calculator to check what refinancing the remaining balance would actually cost if the balloon payment doesn't materialize. The federal solar tax credit calculator can help you plan the funding source more carefully before committing. For general guidance on solar financing structures, see the CFPB's issue spotlight on solar financing.
Questions
A balloon loan sets your regular monthly payments as if the loan were amortized over a long term, often 20 or 25 years, but requires the entire remaining balance to be paid off in a single lump sum after a much shorter period, commonly 5 years. On a $28,000 loan at 6.99% APR with a 5-year balloon, that lump sum runs about $24,148.
It keeps the regular monthly payment low, similar to a full-term loan, while planning to pay off the bulk of the balance with a specific future source of funds, such as a bonus, the sale of another asset, or an unused tax credit carrying forward from a system installed before the 2026 expiration. It's a higher-risk structure if that expected source of funds doesn't materialize on schedule.
Most balloon loan agreements require you to either pay the lump sum in full, refinance the remaining balance into a new loan, or in some cases face default consequences specified in the contract. It's important to have a clear, realistic plan for the balloon payment before signing this type of loan.
It depends on how it's used. If the balloon payment is made on schedule, total interest can be lower than a full 20 or 25-year loan because the balance stops accruing interest sooner. If the balloon has to be refinanced instead, total cost can end up higher due to added fees and a new interest period.
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