If you’ve decided on taking out a balloon repayment option, you may be concerned about the prospect of not being able to pay it at the end of your car loan. But if you plan out your finances to ensure you can make the balloon payment, there are several ways you can benefit:
Here are some of them:
Since a balloon payment option allows you to repay your car loan at a reduced rate over a longer period of time, you can purchase a car you wouldn’t normally be able to afford. This means you can actually drive away in the car of your dreams, rather than settling for a smaller, cheaper model that doesn’t fulfil your desires. Just remember that you will have a larger balloon at the end of the loan.
The interest rate on the balloon payment will be the same as any loan over the full term, however there will be slightly more interest payable as a result of having a larger amount remaining in the balloon payment, therefore increasing the amount borrowed late in the term of the loan. Therefore, you might be eligible to claim back for the outgoing monies spent as part of your overall cash flow with regard to tax deductions, especially if this car is used for business purposes.
Once you have paid off your balloon payment and have come to the full term of the agreement, you can trade in your car or sell it and opt for a full, new balloon payment option, which will give you the option to have the latest model available. This is especially well suited for those of you who want to drive a new car every few years, instead of buying one for long-term purposes.
Bear in mind that if you come into extra money during the term of your balloon payment, paying extra will only reduce the length of your term, not the actual amount of each repayment. Also, it will not reduce the agreed-upon amount of your loan.
For more information regarding car financial advice and balloon payment options, contact us today.