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Balloon Auto Loans? A New Wrinkle in Auto Financing?
What is a balloon car loan?
A balloon car loan is much like a mortgage with a balloon payment. You pay a lower payment for a negotiated term and then a balloon payment at the end. It allows a used car buyer to purchase a more expensive car than he might otherwise be able to afford. It is usually sought by someone who has expectations of a change in their financial situation or is expecting an influx of cash.
Benefits of a Balloon Car Loan
- If time will change your financial picture then that is one thing that a balloon payment car loan will buy you. It can also provide you the opportunity to save the money to make that last large payment.
- A “right to sell” exists in most balloon payment contract should you wish to terminate the agreement, but make sure that you understand how this works and if there are any restrictions placed upon it.
- Since the lender carries most of the loan amount throughout this transaction and the buyer pays mostly interest, more money remains in the hands of the buyer.
- Repossessions are typically lower with this type of loan as the lowered payment is easier for the borrower to make on a timely basis.
- Like other types of auto loans a balloon payment loan carries a fixed rate so there is no worry of payments that fluctuate.
In today’s used auto marketplace demand exceeds supply and an average used car can cost around $12,000 and a used truck several thousand more. If you are looking for a fancier make or model you will pay a premium price. Enter the balloon car payment. For many people who have a budget there is an amount that they have set aside to take care of their transportation needs. With balloon auto financing, that dollar amount will get you more car, than using that same dollar amount for a conventional auto loan.
Since the balloon payment is pre-determine if you can put the amount necessary away every month to have the entire payment at the end, it might be a great idea, if not, you must realize that over the life of the this transaction you have been paying mostly interest and the balloon payment can be more than the car is worth at that time. Student auto financing also has such payment facility.
Balloon Payment Car Loans and Rates
There are a few points which should be a part of any auto loan process
- Check your credit history, know what’s there and if you find errors begin the process that it takes to correct them.
- Make a budget and see what an affordable payment is for you. Knowing what you can afford to spend will make sure that you can make the payments in a timely manner.
- Shop Lenders, see who will offer the type of loan you seek, don’t waste valuable time applying to lenders who don’t make this type of loan.
- When you have gotten a lender and are ready to look for the car make sure that you read all the fine print to be sure that you know all the details and restrictions. If there is something you don’t understand, ask!
Bad Credit Balloon Payment Car Loans?
In most cases only those with good credit will be offered this type of loan. However, there are some conditions under which a bad credit balloon payment auto loan may be available.
- With a co-signer with good credit
- With a large down payment which will reduce the balloon at the end
- If you have a good employment history, stable residence and a salary which will assure a lender of re-payment despite past credit difficulties
At the LoanexFastCash we have a dealer/lender network which handles all types of vehicle financing and the first step is filling out our simple, SSL secure online application.