Which of the following is NOT a characteristic of a balloon payment?

A balloon payment is a significant component in certain loan structures, particularly in cases where a borrower might make smaller regular payments for a period, followed by a large final payment that settles the outstanding balance.

The option asserting that a balloon payment is due at the beginning of the loan term is not correct because balloon payments are typically due at the end of the loan term. Instead, during the earlier periods of the loan, the borrower makes smaller, more manageable payments, often reducing the principal amount before facing the larger balloon payment that covers the remaining balance.

The characteristics of balloon payments include being often larger than the regular installment payments and at times being lower in the initial stages of the loan to allow for easier cash flow management. It also serves to cover the remaining balance of the loan at its conclusion, representing a substantial portion of the principal amount that has not yet been amortized through earlier payments. Thus, option B correctly identifies a misunderstanding of how balloon payments function within a loan structure.