Car loan with balloon financing
What is a car loan with balloon financing or a three way loan? Especially the credit market for vehicle loans offers a variety of possible financing options. Unfortunately, this is also associated with a number of keywords that are not always easy to classify properly. The background to the car financing illuminate, while pointing out advantages, but also risks, the following contribution to the topic of balloon financing.
The car loan with balloon financing – the principles.
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The car loan with balloon financing is a installment loan. Most frequent offerers of this financing possibility are the manufacturers banks of the car brands. Often the balloon loan is used as part of the sales marketing for calculation examples in the loan offers. At first glance, the customer sees the small monthly installments in the same amount, even with a high purchase price. So the buying interest is awakened.
Behind the calculation example is a realistic loan. The rates paid together with the down payment often correspond approximately to the depreciation of the vehicle. At the end of the term, the residual value must be paid in one sum as part of a large completion rate. The closing rate can even be up to half of the actual purchase price.
When is the balloon loan useful?
The car loan as a balloon financing is for most vehicle buyers an interesting financing alternative to the conventional installment loan. Especially the low rate, due to the repayment time divided into two main sections, makes it so interesting.
Purchasers of new vehicle buyers who regularly exchange their vehicle for a new vehicle benefit in particular. You pay, as in the case of leasing, the monthly loss in value as a rate. At maturity of the completion rate, the vehicle is given back in payment and serves as a new down payment.
Another group of vehicle buyers expects a larger one-time payment in the future. For example, a life insurance is paid out. The high completion rate is practically there, but its availability is still in the future. For this group of buyers, the balloon loan is an adequate means to bridge the time.
One group of buyers who can really take advantage of the balloon loan car loan is the undecided. The three-way loan, a modern variant of the balloon loan, leaves the buyer until the very end the choice. He decides between a further financing, payment in one sum by payment of the closing rate and the vehicle return at the time value.
Disadvantages of financing as a balloon loan.
The car loan as a balloon financing in the variant “three way credit” has only two disadvantages for buyers willing to return. When calculating the rates, care should be taken to ensure that the expected loss of value is not undercut. Otherwise threatens at the vehicle return a hefty additional payment. For the same reasons, the value preservation must not be lost sight of. Who considers these two aspects, for the car loan as a balloon financing is a good financing option.