Balloon Payments and Lump Payment Loans Analyzed by Complete Auto Loans

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Complete Auto Loans published a tip-sheet for borrowers that are considering balloon payment loans. Are lower monthly payments worth the risks that come with balloon payments at the end of a loan's term?

Balloon payments are seldom the right choice for a low cost auto loan.

Balloon payments are large payments that occur at the end of specially structured auto loans. While Complete Auto Loans does not typically offer this type of loan, the marketing team at CAL recently published an informative guide that offers some advice for people who are trying to get a balloon loan for their personal automobile. Balloon loans lower monthly payments by shifting a large portion of the loan payment burden to the end of the loan, a boon for people who need lower monthly payments, but difficult to plan for due to the unusual amortization.

While Complete Auto Loans found that balloon loans could be beneficial in a small percentage of cases, they recommended that borrowers be wary of the drawbacks for balloon loans. Because of the way that lenders front-load interest payments in loan amortizations, the value of the automobile (the principle of the loan) is held by the lender until the very end of the loan, so these loans are hard to refinance and it can be impossible to sell the car.

According to Rob Kaiser with Complete Auto Loans, "We found that many borrowers who seek balloon loans do so because they want lower monthly payments, but they don't consider the potential costs of having a balloon payment at the end of their loan. While it might be nice to imagine that you will be in dramatically better financial conditions in a few years, the reality is that most people make only 2%-3% more in income each consecutive year, making a balloon payment difficult to pay off."

Complete Auto Loans is an online lending company that specializes in low-cost loans for bad credit and no credit borrowers, and the staff at CAL will work to ensure that your loan is fair and has the monthly payments that you require.

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Keith Eneix
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