Balloon Payment Credit: Definition and Benefits

Balloon Payment Credit: Definition and Benefits

Have you ever heard about the term balloon payment credit? If not, you can find out what a balloon payment is and what are the benefits here. For some people, this type of credit is indeed profitable, but what exactly makes balloon payments profitable?

As we know, the desire to have a vehicle, be it a car or motorcycle, is no longer a side requirement. No wonder credit lenders and consumers have also begun to try to benefit each other.

High public interest in private vehicle ownership is put to good use by credit providers by providing a balloon payment feature.


What is Balloon Payment?

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Balloon payment is a type of credit payment method that is done with a mild payment system in front and repayment behind. If in a standard credit installments are usually paid in the same amount every month until the credit ends, balloon payments provide benefits in the first few years of installment payments because of the light costs charged.

Why can it be light? Can. Because the balloon payment credit was initially very light and profitable but heavy behind. Why so heavy? Because generally the costs to be paid in the back are 50 percent of the price of the vehicle you are going to buy. So you can imagine how much money must be paid at the end if you buy a car?


Then, what are the benefits?

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The advantage is clearly there in the initial installments are lightweight. Maybe in the first three or four years, depending on the policy of the bank or leasing where you pay, you can get installments that are very light so that your finances remain stable even if you buy a car.

After the light installment period is complete, you must pay the remaining 50 percent of the payment in cash, aka non-credit. If you have money, of course it’s easy to do.

But if your money drags, how do you pay tens or even hundreds of millions of the remaining payments? Confused too, right? Not a few tablets that must be paid.

If at that time you happened to be affected by a disaster, such as losing your job, how can you pay it? You never know how your financial situation will be in the next few years. Many things can happen in three or four years, whether it’s better or worse.


So the point is Ballon Payment is detrimental?

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Talking about whether or not balloon payment is lost, it depends on the circumstances of each. If you have prepared a special savings to pay off the remaining 50 percent payment at the end, it might be easy for you to use this payment system. After all, you already have money that will later be used to pay off.

In addition, you can also use other solutions if indeed you find it difficult to pay the payment at the end, you can sell it with a credit shift. Of course you might not get much profit from sales like this, but at least you already enjoy the comfort of using the new car. So let’s just say that is the benefit you get.


Then Are There Still Other Disadvantages?

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Another deficiency that can occur in this payment system is the condition of vehicles that have deteriorated. With the condition and value of vehicles that are increasingly decreasing, you are required to pay 50 percent of the price of the vehicle where the price may be only a little difference from the price of your used vehicle at that time considering the price of the car will be cheaper after the first few years of its appearance.

Even worse, could your car have been badly damaged by several reasons and factors and you are required to pay that much money to pay off your damaged car? Well, can you imagine what the conditions are like right?


Make a decision carefully

Then, what’s the solution? First understand the ins and outs of this system of advantages and disadvantages to suit your needs. It’s better not to try balloon payment if you aren’t sure you can pay it off at the end. Rather than you losing at the back it’s better not to start, right?


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