The balloon financing is in addition to the classic installment loan or leasing also one of the classic financing models. In vehicle financing, another option is balloon financing. The car buyer pays low monthly installments at this last installment after an optional down payment during the term of the financing, offsetting the depreciation of the vehicle. Nevertheless, a personal loan is often cheaper in the end. In a strike of the old car, there are several ways to finance a new car and take out a loan.
Today, auto buyers have the opportunity to refinance a new or used vehicle in different ways. Balloon financing is one of the traditional financing models in addition to the conventional installment loan or leasing business. Balloon financing can be done either by the dealership itself or by the vehicle bank. The larger the advance payment, the lower the rate and the lower the total debt.
The buyer then pays a monthly installment. The remaining debt is usually very high, hence the term balloon financing, but the acquirer now has several options. This means that the balance can be paid in cash; If you have no savings, you can sell the car and take advantage of the sales proceeds.
It often selects a installment loan, which in turn can be repaid in monthly installments. Above all, the high flexibility of balloon financing convinced many buyers to opt for this model. So it is for the future. If you do not know at the time of purchase whether the car should be used or sold, you should make use of this opportunity. For many of our clients, the low monthly installments are even more important, a deposit does not have to be paid.
In addition, the key interest rates for balloon financing are usually very favorable. Balloon financing is particularly recommended for used cars, as they are subject to the greatest impairment in the first few years. The low level of interest rates in balloon financing should not hide the fact that this financing option is often more expensive than, for example, installment loans.
Only the value of the vehicle, which is reduced and consumed during the contract period, is repaid and the remaining debt is accrued. As a result, the loan term of the loan is increased and the remaining amount must be paid interest. Especially when customers decide to continue using the vehicle, there are serious problems. Follow-up financing is usually possible at much more favorable terms than the original balloon financing; The high interest rates correspond to another balloon that is gradually dissolving.
However, vehicle sales can also be problematic if the vehicle is damaged or has a high mileage, the resale value decreases – the previously calculated difference value can not be achieved and the buyer must raise additional funds to pay the last installment. The balloon financing is therefore particularly suitable for people who have a larger amount at hand at the end of the term, eg by the expiry date of a Contruction loan contract.
The leasing installments are larger, but no more closing rates.
Advantages: Only the use during the contract period is paid, after expiration the device can be taken back without further fees. Fundamental difference to balloon financing: Customers and sellers conclude a buy-back contract, ie the seller can buy the car at the end of the contract to the seller.
It becomes problematic if the agreed minimum value is not met; In this case, the client has to raise the difference himself. For installment loans, a certain amount is paid promptly, with which the automobile can be paid cashless. Advantages: The vehicle passes directly into the property of the purchaser, with some vehicle loans, the vehicle remains until the payment of the last installment at the respective house bank.