Balloon Payment Explained
A balloon payment is an amount of the loan which is due for payment at the end of the financing term. It can be expressed as a percentage of the total loan or a fixed sum, before interest is applied.
Including a balloon payment in car finance can be extremely effective and advantageous. But allowing for this payment when working out loan repayments, can be challenging. Our balloon payment calculator makes the process simple. This is an essential resource for buyers wanting to work out their finance structure preferences with a balloon payment to make buying decisions.
To clarify and confirm the results obtained on our calculation device, our team of experienced motor vehicle lending specialists are on hand for quick quotes and fast approval. Contact us to get started.
A balloon payment is an optional feature on Chattel Mortgage and Commercial Hire Purchase vehicle financing facilities.
Request QuoteA balloon payment is an amount of the loan which is due for payment at the end of the financing term. It can be expressed as a percentage of the total loan or a fixed sum, before interest is applied.
The balloon is subtracted from the total loan before monthly repayments are calculated. With this amount taken out of the loan, the monthly repayments are less than if no balloon was selected.
When buyers opt for car finance with balloon payment, they can quite effectively reduce monthly commitments to an amount which works with their cash flow.
When preparing to purchase a vehicle with finance, the accuracy of the calculations, especially the car loan balloon payment estimation, is extremely important in planning the financing.
In carrying out pre-purchase calculations, buyers may be preparing estimates for business budgeting and forecasting, to decide if a specific vehicle is an affordable option, to ensure the purchase will work with cash flow and not stress the business financial position, and to decide on the specific amount of the balloon to achieve the preferred repayments.
The balloon is due to be finalised at the end of the financing term, it does attract interest, and can be refinanced at the end of the term. To ensure a workable outcome, buyers should be considering the projected resale value of the vehicle when the amount is due.
Our calculation device has been developed to enable borrowers to accurately establish their preferred balloon and estimated repayments. As with all elements of a loan agreement, the balloon amount is subject to lender approval.
Our guides offer quick comparisons and simple explainers to help you roll through the financing process with confidence.
Using our calculator can assist buyers to understand how a balloon impacts the monthly vehicle finance payments. Simply vary the balloon amount and see how the repayments change. What makes our calculator extremely effective, is the high level of technology we have incorporated into our buyer tools. Developing resources to assist buyers confidently prepare for vehicle purchases with finance.
When using the calculator, users should be mindful of their ownership cycle and the potential value of the vehicle at resale time or at the end of the term, whichever comes first. The amount of a balloon should ideally be in line with the vehicle resale value at the end of the term. If the balloon is too large and above the value, the trade-in or sale may not cover the final payout to the lender.
The calculator can assist in deciding how much the balloon should be. A larger balloon resulting in lower repayments but potentially a higher total interest and a greater amount due at the end of the term. A small balloon results in higher monthly repayments, but potentially less total interest and less to pay out the loan at the end of the term.
We work with all types and sizes of commercial operators to achieve workable vehicle finance with balloon payment – fleet operators, SMEs, sole traders, self-employed. All businesses can use our calculator to work out their estimates and preferences.
Get started on calculating your preferred balloon or contact us to discuss a quote.
When using an online calculation tool, it is essential that users appreciate and understand not just how to use the device but how to correctly interpret the results obtained. Users will need figures or estimates for the loan amount required; the loan term; the interest rate; and the balloon payment.
Interest rates are subject to lender assessments of applications. For the purpose of using the calculator, users can input our current best rate for Hire Purchase and Chattel Mortgage. The loan amount may be the total price of the vehicle or the price less any trade-in or deposit. The term may be up to 7 years. Balloon amounts may vary from as little as 20% upwards, subject to lender approval.
Do not deduct the balloon amount from the loan total when entering the figures. The calculator allows for the balloon when making the computations. Type in the figures and see the monthly repayment estimate displayed. To change that estimate, simply adjust the balloon only, the term, or both. When the preferred repayment amount is displayed, contact us for a quote specific to your application.
Calculator users should be mindful of the technical limitations of any online, generic calculation device. No differentiation between users in regard to credit profiles is made. Credit scores and ratings are integral to interest rate offers by lenders and an individual’s score or financials, may impact the rate and any offer made. Lender fees and charges not included in the calculations. These vary across the lender market. As we are accredited with more than 80 lenders, we can provide a firm quote when our experts match your application with the right lender.
Our calculator is free to use, easy to use and carries no obligation to proceed with a quote or application. Contact us for more information.
When making any decisions involving finance, it is advisable to consider all the aspects and all the possibilities. A balloon payment is not available on all standard car loans, so selecting the credit facility which allows for a balloon, may be an advantage for many buyers.
The key advantage of including a balloon payment is in reducing the monthly finance payments to ease cash flow pressure with this major asset acquisition. Buyers may request a balloon that reduces monthly outgoings to an amount that works with their income and other expenses.
Opting for finance with a balloon compared with a loan without a balloon, may enable the purchase of a higher-priced vehicle or possibly a new rather than used vehicle. Enabling buyers to acquire the latest, more energy efficient vehicles which may require less servicing and maintenance over the ownership cycle. A prospect which may be seen as a major benefit in planning costs over the term.
At the end of the term, when the balloon is due for payment in full, refinancing may be considered. This may allow buyers to effectively extend the time to pay off their vehicle. When refinancing a balloon, the used vehicle financing interest rate would be applicable.
Balloon payments are widely used by many business buyers to effectively structure and manage vehicle finance. For assistance in planning your car loan with balloon payment, speak with one of our vehicle lending specialists.
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THE COMPARISON RATE IS CALCULATED ON A SECURED LOAN OF $30,000 FIXED FOR A TERM OF 5 YEARS, NEW GOODS, EFFECTIVE 05/12/2024 AND SUBJECT TO CHANGE. WARNING: THE COMPARISON RATE IS TRUE ONLY FOR THE EXAMPLES GIVEN AND MAY NOT INCLUDE ALL FEES AND CHARGES. DIFFERENT TERMS, FEES OR OTHER LOAN AMOUNTS MAY RESULT IN A DIFFERENT COMPARISON RATE.
When applying for vehicle financing with a balloon inclusion, applicants may request their preferred balloon amount. Approval is subject to lender guidelines and an assessment of the application.
Yes. Where a self-employed operator meets approval criteria, they may opt for a balloon in their financing.
A balloon payment is due to be paid in full after the last monthly repayment is made.
Yes. Subject to lender approval of the application, a balloon amount may be refinanced. The refinancing may be with the same or a different type of credit facility to the original loan.
A balloon is an optional feature in Chattel Mortgage and Commercial Hire Purchase.
Where a balloon is included in Chattel Mortgage and Hire Purchase, a tax deduction on the overall asset acquisition is realised when the vehicle is depreciated. The amount of the depreciation is in line with ATO schedules. The balloon and repayments are not individually deductible.
Interest is charged on a balloon payment.
An online vehicle financing calculator may be used to work out monthly loan estimates with different balloon amounts.
An online calculator does not have the ability to ascertain the credit profile of users. The rate offered may vary. The device also does not allow for the fees and charges applied by individual lenders. These aspects can result in an offer which differs from the calculator results.
Where a vehicle is sold or traded prior to the conclusion of the financing term, the full payout must be finalised for the sale to proceed. This includes finalising any outstanding monthly repayments plus the balloon. Where a vehicle is traded in, the dealer may liaise with the lender to make the payout. Where the trade in is below the payout figure, the owner must make up the difference.