If you’ve been looking around at buying a new car, or your first car, you’ve probably heard the term ‘balloon payment’ during your research. If you’re not familiar with it, then perhaps you’re wondering what it means? That’s why you’ve landed here!
A balloon payment is a type of loan payment for purchasing a car. The process of buying a car varies by the way you pay for it. If you’ve been saving up and have the full amount ready, it’s pretty simple; choose a car, sign paperwork, pay, and drive home. If you’re taking a loan from the bank, it’s a different process. If you’re paying it off then there’s more paperwork and monthly installments to think about. Then, there’s the balloon payment…
What is a balloon payment?
A balloon payment, also known as a balloon loan, is a type of loan that is divided so that a large amount of the payment is set aside. This one-time, lump-sum amount will have to be paid at the end of the loan term period. This helps make the monthly installments of the payments more affordable.
There may be some appealing benefits to taking out a balloon loan payment on a car, but there are important factors to keep in mind.
Make sure you’re financially stable
As with taking out any loan, you should be responsible with your finances and make sure you can afford the monthly installments and will be prepared to pay the lump sum at the end of the loan period.
Also, keep in mind the cost to maintain a car. Don’t forget to budget your finances! Work out your budget for monthly petrol costs, service costs, tyre costs and insurance costs.
People who are not financially savvy or responsible with their money often get over-excited at the concept of paying off their dream car and make the mistake of setting the bar too high for what’s actually affordable.
Put simply, a balloon payment is a type of loan payment that is made up of cheaper monthly installments, at the expense of a large one-time payment at the end of the loan term. Balloon payments can be very helpful if budgeted correctly.
Buying a car is not as simple as just the car’s cost. There are other car maintenance costs and finances to give thought to as well. If you’re considering taking a balloon payment on a car, or for the car of your dreams, be sure to include additional costs in your budget plan.
The cost of owning a car also includes the cost of petrol, services, replacements and insurance! When it comes to paying for a car on loan, insurance is highly recommended and usually a requirement too.
Are you ready to purchase the car of your dreams and get insurance for your new precious investment? Contact us today to speak to one of our skilled broker consultants for assistance or to answer any insurance questions you may have.
Get a quick vehicle or home contents insurance quote from us on: https://qualityquote.co.za/car-insurance-quote/