what exactly is a balloon loan…
A balloon loan is a mortgage that often allows for low interest rate payments, but at the end of the loan term, what is left of the mortgage principle is due in one lump sum payment. The major problem with such a loan is that the borrower needs to be self-disciplined in preparing for the large single payment, since the payments being made are not enough to repay the loan.

3-15 YR Balloon Loans
These loans are offered in three, five, seven, ten or fifteen year periods and are usually pegged to a treasury index. The outstanding balance must be either refinanced or paid in full at the end of the initial period. A fee is usually required to refinance and lenders are not required to extend the loan after the balloon date, although some lenders may do so.

This type of loan is generally done as a 'quick-fix'; since the loan requires very little capital outlay during the loan period, giving the borrower the ability redirect leftover income. (i.e. to fix credit debt)