Choosing to have a balloon payment attached to a car loan can help make repayments easier, but what happens when you have reached the end of your loan agreement and you cannot pay off the balloon payment. Will you be able to refinance a car that has a balloon payment attached to it? Here is what you need to know.
What is a balloon payment?
A balloon payment is a car loan feature that enables the borrower to settle an inflated lump sum at the end of the loan agreement period. This means that borrowers will have to pay the lump sum along with the accrued interest rate. However, if the car owner is unable to settle the balloon payment, they may be left with the option of selling or refinancing their car.
Can you refinance a balloon payment?
It is possible to refinance your balloon payment. Refinancing can offer a lower interest rate which can give you access to better rates and fees. You can also make better repayments when it comes to paying off your balloon payment. However, there are a few things that need to be taken into considerations such as the fees and charges that may come with refinancing a car loan.
How can you refinance your car loan?
When it comes to refinancing your home loan what this basically means is that you have the choice of switching lenders to one that will help you manage your loan more effectively. You could possibly save hundreds if not thousands of dollars when it comes to refinancing your car loan. Comparing your car loan features are one of the ways in which you can find a new deal that is suitable for you. This means knowing which loan features to compare to see whether refinancing will be an affordable option for you or if it will push you further into debt.
What features can you compare?
In order to make sure that refinancing won’t create more financial troubles for you, it is vital to compare your options. Comparing features such as:
- Interest rate. Using a car loan calculator can help you know what the cost of refinancing will be over the loan period. Comparing various loans can help you find one that has the lowest interest rate that can help you save money in the process.
- Comparison rate. Always keep in mind to check the comparison rate, which is a percentage that is slightly higher than the interest rate, and also encompasses the fees and charges that come with the loan. It can help you know whether the loan will be affordable or not in the long run.
- Flexible repayments. Comparing loans can also help you find one that comes with flexible repayments that match your cash flow and will also help you better manage your repayments. Check the loan to see if you can make payments weekly, fortnightly or monthly. Check to see if you will be able to make early repayments without attracting a penalty fee for it.
Before refinancing a car loan, it is important that you weigh the fees and charges that come with the loan to avoid biting off more than you can chew.