Car loan balloon payment is a concept that one must understand before signing any car loan papers and bringing a new car home. What is a car loan balloon payment? Car loan balloon payments are devised to reduce EMIs and transit the major portion of loan to one final payment. In short, your loan EMIs may get reduced by a few thousands and get added to one final payout. Lending organizations usually front-load the interest amount, so the balloon payment mainly includes the principal amount. But the actual might not be as pretty as it sounds in theory. There are a number of precautions that need to be taken by the borrower if he or she opts for a car loan balloon payment. Here are a few things that you may do to keep the potential balloon payments dangers at bay:
Always Keep Your Payouts Low: Balloon payment should be an option only when you need to keep your EMIs low. Remember, in the end you will have to shell out a larger amount. Additionally, opt for this kind of payment only when you need to buy a brand new car and you have no money for down payment.
Significance Of Advance Planning: Start saving a little every month, it is imperative to start planning in advance when you have a giant payout coming forth in near future. Refinancing of balloon payment is a very difficult thing especially in India. You don’t take loan to pay back another loan. You may opt for extending the balloon payment but every lender might not give you that option. Not having any money for the last payout might be the worst thing and you may end up losing the very thing you took the loan for in first place. So, it is a safer option to plan the payment in advance so that nothing goes wrong at the last moment.