BALLOON PAYMENT PROMISSORY NOTE

(Large Final Payment at Maturity - UCC Article 3)

Principal Amount: $[PRINCIPAL AMOUNT]
Issue Date: [DATE]
Maturity Date: [DATE]
Note Number: [UNIQUE IDENTIFIER]

BALLOON PAYMENT NOTICE

THIS LOAN IS NOT FULLY AMORTIZING. A LARGE "BALLOON" PAYMENT OF APPROXIMATELY $[BALLOON AMOUNT] WILL BE DUE ON [MATURITY DATE]. THE BORROWER WILL BE REQUIRED TO REPAY THE ENTIRE REMAINING PRINCIPAL BALANCE AT THAT TIME.

REFINANCING MAY BE REQUIRED. REFINANCING IS NOT GUARANTEED AND DEPENDS ON FUTURE MARKET CONDITIONS AND BORROWER'S CREDITWORTHINESS.

TABLE OF CONTENTS

I. Document Header
II. Definitions
III. Promise to Pay
IV. Payment Schedule and Balloon Payment
V. Interest and Usury Compliance
VI. Security (If Applicable)
VII. Representations and Warranties
VIII. Covenants
IX. Events of Default and Remedies
X. Balloon Payment Risk Acknowledgment
XI. Dispute Resolution
XII. General Provisions
XIII. Execution Block

I. DOCUMENT HEADER

1.1 Maker (Borrower)

1.2 Payee (Lender)

1.3 Loan Terms Summary

II. DEFINITIONS

"Applicable Law" means all federal, state, and local laws applicable to this Note, including UCC Article 3, applicable usury statutes, and, if applicable, TILA and Regulation Z.

"Balloon Payment" means the final payment due on the Maturity Date in the amount of all remaining unpaid Principal plus all accrued and unpaid interest.

"Business Day" means any day other than a Saturday, Sunday, or bank holiday in the Governing Law State.

"Default Rate" means the Interest Rate plus [PERCENTAGE]% per annum, subject to the Maximum Lawful Rate.

"Event of Default" has the meaning set forth in Section IX.

"Governing Law State" means the State of [STATE].

"Holder" means Payee or any subsequent holder in due course pursuant to UCC § 3-302.

"Interest Rate" means [PERCENTAGE]% per annum.

"Maker" means the borrower identified in Section 1.1.

"Maturity Date" means [DATE], the date on which the Balloon Payment is due.

"Maximum Lawful Rate" means the maximum rate of interest permitted under Applicable Law.

"Note" means this Balloon Payment Promissory Note.

"Obligations" means all present and future debts and obligations of Maker to Holder under this Note.

"Payee" means the lender identified in Section 1.2.

"Principal Amount" means $[AMOUNT], subject to reduction by payments.

"Regular Payment" means each periodic payment due prior to the Balloon Payment.

"UCC" means the Uniform Commercial Code as enacted in the Governing Law State.

III. PROMISE TO PAY

3.1 Unconditional Promise

FOR VALUE RECEIVED, Maker unconditionally promises to pay to the order of Payee, at [PAYMENT ADDRESS] or such other place as Holder may designate in writing, the Principal Amount of:

[DOLLAR AMOUNT WRITTEN OUT] AND [XX]/100 DOLLARS ($[NUMERICAL AMOUNT])

together with interest thereon as provided herein, in lawful money of the United States.

3.2 Nature of Balloon Obligation

(a) Partial Amortization: This Note provides for Regular Payments calculated based on a [NUMBER]-month amortization schedule, but with all remaining principal due as a Balloon Payment on the [NUMBER]-month Maturity Date.

(b) Balloon Payment Required: Because the loan term is shorter than the amortization period, a substantial Balloon Payment will be due at maturity.

(c) Not Fully Amortizing: The Regular Payments will NOT fully repay this loan. The Balloon Payment must be paid from other sources.

IV. PAYMENT SCHEDULE AND BALLOON PAYMENT

4.1 Regular Payments

Maker shall pay [NUMBER] consecutive [MONTHLY/QUARTERLY] Regular Payments as follows:

Payment Structure (Select One):

☐ Interest-Only Regular Payments: Each Regular Payment shall be $[AMOUNT], representing accrued interest only. The entire Principal Amount plus any accrued unpaid interest shall be due as the Balloon Payment.

☐ Partially Amortizing Regular Payments: Each Regular Payment shall be $[AMOUNT], calculated to amortize the Principal over [AMORTIZATION PERIOD] months. Because the loan term is only [TERM] months, the remaining balance will be due as the Balloon Payment.

☐ Fixed Principal Plus Interest: Each Regular Payment shall consist of $[FIXED PRINCIPAL] in principal plus accrued interest on the outstanding balance. The remaining balance shall be due as the Balloon Payment.

4.2 Payment Schedule

4.3 Balloon Payment

(a) Amount: On the Maturity Date, Maker shall pay to Holder the Balloon Payment, consisting of:
- All remaining unpaid Principal: approximately $[AMOUNT]
- All accrued and unpaid interest
- All other amounts then due under this Note

(b) Estimated Balloon Amount: Based on timely payment of all Regular Payments, the estimated Balloon Payment will be approximately $[BALLOON AMOUNT].

(c) No Right to Refinance: Maker acknowledges that Holder has no obligation to refinance or extend the Balloon Payment. Failure to pay the Balloon Payment when due shall constitute an Event of Default.

4.4 Application of Payments

Payments shall be applied in the following order:
1. First, to late charges, fees, and costs;
2. Second, to accrued interest;
3. Third, to principal;
4. Fourth, to other Obligations.

4.5 Payment Method

All payments shall be made by:
☐ Wire transfer to: [BANK NAME, ROUTING NUMBER, ACCOUNT NUMBER]
☐ ACH to: [ACCOUNT INFORMATION]
☐ Check payable to: [PAYEE NAME] at [ADDRESS]

4.6 Late Charges

If any payment is not received within [NUMBER] days after due date, Maker shall pay a late charge of [PERCENTAGE]% of the overdue amount (or $[MINIMUM], whichever is greater).

4.7 Prepayment

☐ Prepayment Permitted: Maker may prepay all or any portion of the Principal at any time without penalty. Any prepayment shall reduce the Balloon Payment amount.

☐ Prepayment with Penalty: Prepayment within [NUMBER] months requires a prepayment penalty of [PERCENTAGE]%.

☐ Prepayment Restricted: Prepayment requires Holder's consent.

V. INTEREST AND USURY COMPLIANCE

5.1 Interest Rate

Interest shall accrue on the outstanding Principal at the Interest Rate of [PERCENTAGE]% per annum from the Issue Date until paid in full.

5.2 Computation Method

Interest shall be computed on the basis of:
☐ A 360-day year (30/360)
☐ A 365-day year (Actual/365)

5.3 Default Interest

Upon an Event of Default, interest shall accrue at the Default Rate of [PERCENTAGE]% per annum until cured or paid.

5.4 Usury Savings Clause

(a) Total interest shall not exceed the Maximum Lawful Rate.
(b) Excess interest shall be credited to Principal or refunded.
(c) Interest shall be spread over the full term for usury calculations.

5.5 TILA Disclosures

☐ Business Purpose Loan - TILA Exempt: Maker represents proceeds will be used for business, commercial, investment, or agricultural purposes.

☐ Consumer Loan - TILA Applies: Required disclosures provided separately:
- APR: [PERCENTAGE]%
- Finance Charge: $[AMOUNT]
- Amount Financed: $[AMOUNT]
- Total of Payments: $[AMOUNT]
- Balloon Payment Disclosure: A balloon payment of $[AMOUNT] is due on [DATE].

VI. SECURITY (IF APPLICABLE)

6.1 Security Status

☐ UNSECURED: This Note is unsecured.

☐ SECURED: This Note is secured by:

Collateral Description:
[DESCRIBE COLLATERAL]

Security Documents:
☐ Security Agreement dated [DATE]
☐ UCC-1 Financing Statement
☐ Deed of Trust/Mortgage recorded in [COUNTY]
☐ Other: [DESCRIBE]

VII. REPRESENTATIONS AND WARRANTIES

Maker represents and warrants:

7.1 Maker has full authority to execute and perform this Note.

7.2 This Note is a valid, binding obligation of Maker.

7.3 No conflicts exist with laws or other agreements.

7.4 All information provided is true and accurate.

7.5 Maker is solvent.

7.6 Balloon Payment Understanding: Maker represents and acknowledges:
(a) Maker understands that a large Balloon Payment will be due on the Maturity Date;
(b) Maker has a reasonable expectation of ability to pay the Balloon Payment through [DESCRIBE: refinancing, sale of property, other funds, etc.];
(c) Maker understands that refinancing is not guaranteed;
(d) Maker has been advised to consult with financial and legal advisors regarding the Balloon Payment obligation.

VIII. COVENANTS

8.1 Affirmative Covenants

Maker shall:
(a) Make all payments when due;
(b) Provide financial information upon request;
(c) Notify Holder of material adverse changes;
(d) Maintain Collateral (if secured);
(e) Comply with all Applicable Laws.

8.2 Negative Covenants

Maker shall not, without consent:
(a) Transfer substantially all assets;
(b) Incur excessive additional indebtedness;
(c) Grant additional liens on Collateral (if secured).

IX. EVENTS OF DEFAULT AND REMEDIES

9.1 Events of Default

Each of the following constitutes an Event of Default:

(a) Payment Default: Failure to make any Regular Payment within [NUMBER] days after due date;

(b) Balloon Payment Default: Failure to pay the Balloon Payment on the Maturity Date;

(c) Representation Default: Any representation proves materially false;

(d) Covenant Default: Breach of covenant uncured for [NUMBER] days after notice;

(e) Insolvency: Bankruptcy, insolvency, or assignment for benefit of creditors;

(f) Judgment: Unsatisfied judgment exceeding $[AMOUNT];

(g) Cross-Default: Default under other material indebtedness;

(h) Collateral Impairment (if secured): Material loss or impairment of Collateral.

9.2 Acceleration

Upon an Event of Default, Holder may declare all Obligations immediately due and payable.

9.3 Remedies

Upon an Event of Default, Holder may:
(a) Commence collection actions;
(b) Apply Default Rate;
(c) Exercise secured party remedies under UCC Article 9 (if applicable);
(d) Recover attorneys' fees and costs;
(e) Exercise all other available remedies.

9.4 No Waiver

No delay constitutes a waiver. All remedies are cumulative.

X. BALLOON PAYMENT RISK ACKNOWLEDGMENT

10.1 Borrower Acknowledgment

MAKER ACKNOWLEDGES AND AGREES AS FOLLOWS:

☐ I/We understand that this loan requires a BALLOON PAYMENT of approximately $[AMOUNT] due on [DATE].

☐ I/We understand that the Regular Payments will NOT fully repay this loan.

☐ I/We understand that I/we will need to pay the Balloon Payment from sources other than Regular Payments, such as:
☐ Refinancing with a new loan
☐ Sale of property or assets
☐ Savings or other available funds
☐ Other: [DESCRIBE]

☐ I/We understand that REFINANCING IS NOT GUARANTEED and may not be available due to:
- Changes in interest rates
- Changes in property value
- Changes in my/our creditworthiness
- Changes in lending standards
- Other market conditions

☐ I/We understand that if I/we cannot pay the Balloon Payment when due, I/we will be in DEFAULT and may:
- Lose the Collateral (if secured)
- Face collection actions and judgments
- Be liable for the entire unpaid balance plus interest, fees, and costs

☐ I/We have been advised to seek independent legal and financial advice before signing this Note.

☐ I/We have had the opportunity to ask questions and understand the terms.

Maker Initials: _______ Date: _______

XI. DISPUTE RESOLUTION

11.1 Governing Law

This Note shall be governed by the laws of the State of [GOVERNING LAW STATE]. UCC Article 3 applies.

11.2 Forum Selection

Any action shall be brought in the courts of [COUNTY], [GOVERNING LAW STATE].

11.3 Waiver of Jury Trial

EACH PARTY WAIVES THE RIGHT TO JURY TRIAL.

11.4 Arbitration (Optional)

☐ Disputes shall be resolved by arbitration administered by [AAA/JAMS] in [CITY, STATE].

XII. GENERAL PROVISIONS

12.1 Notices: Written notices to addresses in Section I.

12.2 Amendments: Written instrument signed by both parties.

12.3 Successors: Binding on successors. Maker may not assign. Holder may freely assign.

12.4 Severability: Invalid provisions modified; remainder continues.

12.5 Waiver of Presentment: Maker waives presentment, demand, notice of dishonor, and protest.

12.6 Joint and Several: Multiple Makers are jointly and severally liable.

12.7 Attorneys' Fees: Prevailing party recovers fees.

12.8 Electronic Signatures: Valid under E-SIGN Act.

XIII. EXECUTION BLOCK

IN WITNESS WHEREOF, Maker has executed this Balloon Payment Promissory Note as of the Issue Date.

MAKER:

If Individual:

Signature: _________________________________
Printed Name: [MAKER NAME]
Date: ___________

If Entity:

[ENTITY NAME]
By: _________________________________
Name: [NAME]
Title: [TITLE]
Date: ___________

ACKNOWLEDGED BY PAYEE:

Signature: _________________________________
Printed Name: [PAYEE NAME]
Title: [TITLE]
Date: ___________

COMPLIANCE CHECKLIST

☐ Interest rate complies with state usury laws
☐ Balloon Payment amount calculated and disclosed
☐ Borrower acknowledgment of balloon payment risk signed
☐ If consumer loan: TILA balloon payment disclosures provided
☐ If secured: Security Agreement and UCC-1 filed
☐ Refinancing/exit strategy discussed with borrower
☐ Legal counsel review completed

LEGAL CITATIONS REFERENCE

UCC Article 3

• § 3-104: Negotiable instrument definition
• § 3-108: Payable at definite time
• § 3-302: Holder in due course

Federal Law

• Truth in Lending Act: 15 U.S.C. § 1601 et seq.
• Regulation Z: 12 C.F.R. Part 1026 (balloon payment disclosures)
• E-SIGN Act: 15 U.S.C. § 7001 et seq.

Prepared for professional use. Verify all calculations and regulatory requirements before execution.