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How does the balloon payment work with car finance?

Do they substract the balloon percentage from the total and work out your installment and add the interest of the balloon amount ? 31 mths ago - -21 min left to answer.

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Best Answer - Chosen by Voters A balloon financing plan has two stages. The first stage is where you agree to pay a payment over time (usually very low payments and on a short term). The second stage is after you completed your monthly payments you have one last payment, the remaining balance of the car, and you still owe that payment. You can refiance it if you don't have the cash.

Source: yahoo

31 mths ago

I'll never, ever again in my life take a balloon payment... You struggle to trade your vehicle in...

31 mths ago

This is a misunderstood finance option: the balloon amount is subtracted from the total, the interest over the agreed period is applied to the new (lower) amount and then you pay. The last payment - the balloon - is not included in interest charges. This works very well if taken over 5 years, and many cars these dyas have 5 year warranty periods. So you pay less and sell the car at the end of its warranty, usually at at profit sufficient enough for you to start all over again. Works less well with smallr (sub R180k) cars but really well with the marques.

31 mths ago

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