Balloon Finance
Balloon Finance
If you’ve ever thought of buying a car beyond your budget, you are not alone. Balloon payments make getting your desired vehicle possible through their unique repayment method.
What is a balloon payment?
A balloon payment or a residual value payment is the lump sum you agree upon, to pay back to a lender at the end of a loan term. The payment method ensures reduced payments throughout the loan term with the balloon amount paid as lump sum at the end. The lump sum amount is calculated depending on the asset’s depreciated value. Compared to most other loan repayment options, the monthly repayment amount is much smaller in balloon finance. This allows you the perfect opportunity to upgrade to a better vehicle by taking a larger loan.
Whether you intend to purchase a business car or a personal one, balloon payments offer a convenient repayment method, specifically for those who cannot afford to pay a large sum every month throughout the loan duration.
What is expected at the end of a balloon finance term?
There are a number of ways to go about repaying the residual amount at the end of the loan term.
- The first option is to sell the vehicle and use the amount to pay off the lump sum amount. In such a case, you can also choose to get a replacement car through a new loan.
- For those who would like to keep the vehicle and close off the loan, paying off the lump sum amount is the way to go.
- A third option is to refinance the residual amount into a new loan which you can gradually pay off just like the previous loan.
Balloon Finance with Car Finance 4 You
Balloon finance offers more flexibility than most other loans, making it a viable option for those with limited incomes. You can check the potential lump sum amount in your case by using a balloon car loan calculator or contacting one of our representatives to better understand your options.
Frequently Asked Questions
The maximum amount of residual payment varies for each individual due to the multiple determining factors that include the loan term, how old the vehicle is, the financial profile of the borrower, and the type of loan opted for.