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Car Loan with Balloon Payment | Pros, Cons & Refinance Options
Find the best car loan with a balloon payment. Learn how it works, its pros & cons, and how to refinance a balloon payment.
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What is a Car Loan Balloon Payment?
A car loan with a balloon payment is a financing option where a large lump sum repayment is due at the end of your loan term...
How Do Balloon Payment Car Loans Work?
A balloon payment loan is structured into two key parts...
Car Loan with and Without Balloon Payment – Example Calculation
| Loan Type | Car Loan with Balloon | Car Loan without Balloon |
|---|---|---|
| Loan Amount | $30,000 | $30,000 |
| Loan Term | 5 years | 5 years |
| Interest Rate | 7% | 7% |
| Balloon Payment | $7,500 (25% of loan) | $0 |
| Monthly Repayment | $489.28 | $594.04 |
Use our Asset Finance Calculator to estimate your repayments.
What Are Your Options When the Balloon Payment is Due?
- Pay off the balloon payment and keep the car. If you have the funds, you can simply clear the loan.
- Trade in your car. Many borrowers use their car’s trade-in value to cover the balloon payment.
- Sell the car. Selling the car and using the proceeds to pay off the balloon amount is another common option.
- Refinance the balloon payment. You can refinance the balloon amount into a new loan to spread out payments.
Why Consider a Balloon Payment for Your Car Loan?
Balloon payments can help lower monthly repayments, making car ownership more affordable.
Potential Disadvantages of a Car Loan with Balloon Payment
- Higher overall cost: You may pay more in interest over the life of the loan.
- Large final payment: The balloon amount can be financially challenging if not planned for properly.
FAQs
What happens if I can’t pay the balloon payment?
You may need to sell the car, trade it in, or refinance the balloon payment with a new loan.
Can I refinance a balloon payment?
Yes, many lenders offer balloon payment refinancing options, allowing you to spread the cost over a new loan term.
Are balloon payments available for business car loans?
Yes, business vehicle finance often includes balloon payment options to keep business cash flow flexible.
For more tailored options, check our Asset Finance Calculator.
Disclaimer: The opinions expressed in this article are strictly for general informational purposes only and should not be taken as financial advice or recommendations.
Written By
The Craggle Team