Discussion about "balloon payments". - LS1TECH - Camaro and Firebird Forum Discussion



Discussion about "balloon payments".

Reply
 
Thread Tools Search this Thread
Old 02-19-2017, 02:35 PM   #1
TECH Junkie
Thread Starter
iTrader: (6)
 
bad_408_vert's Avatar
 
Join Date: Jan 2009
Location: Queens, NYC
Posts: 3,140
Default Discussion about "balloon payments".

So I'm trying to educate myself on how this works.

My understanding/ hypothetical case :
If Sticker price for a car is $30k.
I take out loan at x percent apr for $20k.

My payments are on a loan of 20k plus interest.

Once I paid off 20k at end of term of the loan, I decide if I want to pay off the remaining $10k or "sell it to someone else" and sign the title and next person would be making the payments.

Is that how that works?

Has anyone bought a car this way?
bad_408_vert is offline   Reply With Quote
Old 02-19-2017, 02:46 PM   #2
TECH Veteran
iTrader: (11)
 
infinitebird's Avatar
 
Join Date: Jul 2004
Location: Atlanta, GA
Posts: 4,269
Default

If you take out a loan for 20k, where is the other 10k coming from for the purchase?

I suspect what you are actually referring to is taking out a loan for 30k but only making amortized payments on the first 20k and the payback of the last 10k is structured as a balloon payment after a set number of years.

Personally I would see that arrangement as probably indicating that you are trying to buy more car than you can really afford.
infinitebird is offline   Reply With Quote
Old 02-19-2017, 02:53 PM   #3
TECH Junkie
Thread Starter
iTrader: (6)
 
bad_408_vert's Avatar
 
Join Date: Jan 2009
Location: Queens, NYC
Posts: 3,140
Default

To level set, I'm not going to buy a c7 tomorrow because I know I can't afford it.
Just trying to understand how this works.
bad_408_vert is offline   Reply With Quote
Old 02-20-2017, 04:35 AM   #4
Launching!
iTrader: (10)
 
Join Date: Jun 2008
Posts: 231
Default

This is how so many people lost their houses. Don't buy **** you can't afford.

But to answer your question, no if you sell the car the next person isn't on the hook for the remaining balance. When that balloon payment comes up due you better have 10k.

Last edited by sw07gt; 02-20-2017 at 04:40 AM.
sw07gt is offline   Reply With Quote
Old 02-20-2017, 06:40 AM   #5
Staging Lane
iTrader: (1)
 
Join Date: Dec 2012
Posts: 56
Default

It could also be in the form of another loan at current rates that time.
TurboTim is offline   Reply With Quote
Old 02-20-2017, 07:11 AM   #6
Staging Lane
 
TheUrbz's Avatar
 
Join Date: Jul 2016
Location: "U aint frum round hur ar ya boy" Texas.
Posts: 50
Default

This reminds me of my father who had a paper that he wrote up that showed how long some stores take to cash a check. A variable master at floating. He wasnt bad with money. We were just freakin poor and had to eat.

In this case this isnt as important, but just as equally stupid.
TheUrbz is offline   Reply With Quote
Old 02-20-2017, 07:35 AM   #7
Moderator
iTrader: (1)
 
Z Fury's Avatar
 
Join Date: Oct 2007
Location: Indianapolis
Posts: 1,555
Default

Quote:
Originally Posted by infinitebird View Post
If you take out a loan for 20k, where is the other 10k coming from for the purchase?

I suspect what you are actually referring to is taking out a loan for 30k but only making amortized payments on the first 20k and the payback of the last 10k is structured as a balloon payment after a set number of years.
Quote:
Originally Posted by TurboTim View Post
It could also be in the form of another loan at current rates that time.
Both of these are correct.

A balloon payment is a final chunk payment on a loan. infinitebird laid it out very well, so I won't rehash that. I just wanted to tie his post and TurboTim's post together. What a lot of people end up doing with a balloon payment loan is refinancing the balloon payment as a new loan once they get to that point of the original loan.

Personal opinion, but I think balloon payment loans should be outlawed. It feels like predatory lending to me, and some consumers have to be protected from themselves.
Z Fury is offline   Reply With Quote
Old 02-20-2017, 01:11 PM   #8
TECH Fanatic
 
Join Date: Nov 2001
Location: IL
Posts: 1,076
Default

Are you talking about a lease? I've heard penfed now offers a traditional loan that acts like a lease. Your loan is based off a percentage of the value and at the end you have a large buyout amount.

I agree with above, if you need to go this route it means you can't afford the car

This is penfeds "payment saver" loan https://www.penfed.org/Payment-Saver-Auto-Loan/
2QuikTA is offline   Reply With Quote
Old 02-20-2017, 01:58 PM   #9
TECH Fanatic
iTrader: (2)
 
Jon5212's Avatar
 
Join Date: Jan 2006
Location: Indianapolis Indiana
Posts: 1,297
Default

As the above poster said, this sounds like a lease. I've never seen a regular auto loan do a balloon type payment? Either way, balloon loans are a bad idea in most cases.
Jon5212 is offline   Reply With Quote
Old 02-20-2017, 03:50 PM   #10
Launching!
iTrader: (10)
 
Join Date: Jun 2008
Posts: 231
Default

Leases are a form of a balloon loan but you turn the car in with the option of making the balloon payment and buying the car. A traditional balloon loan you wouldn't have the option of turning the car in.
sw07gt is offline   Reply With Quote
Old 02-21-2017, 08:19 AM   #11
Moderator
iTrader: (1)
 
Z Fury's Avatar
 
Join Date: Oct 2007
Location: Indianapolis
Posts: 1,555
Default

Quote:
Originally Posted by Jon5212 View Post
As the above poster said, this sounds like a lease. I've never seen a regular auto loan do a balloon type payment? Either way, balloon loans are a bad idea in most cases.
My dad got a balloon payment loan on his '94 K-Blazer back in 1995. Maybe they aren't as popular now, but I know they at least were a thing at one point.

I still remember my mom's reaction when the balloon payment came due. Lots of yelling in my household that evening (dad was sneaky about finances - mom is the accountant).
Z Fury is offline   Reply With Quote
Old 02-21-2017, 11:06 AM   #12
Douchebag On The Tree
 
justin455's Avatar
 
Join Date: Nov 2009
Location: Indianapolis, IN
Posts: 1,270
Default

Wow, I've now learned of a worse way to buy a car than extending the term to meet a monthly payment criteria.
justin455 is offline   Reply With Quote
Old 02-22-2017, 08:16 AM   #13
Moderator
iTrader: (1)
 
Z Fury's Avatar
 
Join Date: Oct 2007
Location: Indianapolis
Posts: 1,555
Default

Quote:
Originally Posted by justin455 View Post
Wow, I've now learned of a worse way to buy a car than extending the term to meet a monthly payment criteria.
I think the balloon payment started as a way to lower payments without extending the term. These loans started back in the days before the 5 year loan, let alone the 6 or 7+ years that banks are willing to finance now.
Z Fury is offline   Reply With Quote
Old 02-22-2017, 02:22 PM   #14
Village Troll
iTrader: (2)
 
SS RRR's Avatar
 
Join Date: Oct 2002
Location: Jackstandican
Posts: 8,916
Default

Just. Don't.
SS RRR is offline   Reply With Quote
Old 02-22-2017, 03:10 PM   #15
TECH Fanatic
iTrader: (13)
 
AnotherWs6's Avatar
 
Join Date: Sep 2012
Location: Westchester, NY
Posts: 1,850
Default

Balloons are for birthdays and smuggling drugs up your *** hole. You can use a condom for both of those things too. Just don't do so when there are kids around.

You don't want anything to do with a balloon payment unless you KNOW you will have that much cash on hand when the last payment comes do. No, you can not sell it and have the other guy off of the hook. You could sell it, have the new buyer give you payment and then use those proceeds to pay off the loan. And the loan will have to be paid off before you transfer title.

A balloon payment CAN make sense in certain situations, like buying a house to flip with a mortgage. Keeps your monthly payment low while house is being renovated.

To me it seems like you want to know how to buy a car that you can't afford.
AnotherWs6 is offline   Reply With Quote
Old 02-23-2017, 04:23 AM   #16
12 Second Club
iTrader: (3)
 
bufmatmuslepants's Avatar
 
Join Date: Mar 2007
Location: Warrenton, VA
Posts: 3,093
Default

If ballon payments are becoming popular again, then I guess the banks didn't learn a lesson in 2007 since the government bailed them out, and with 84 and 96 month auto loans and ballon payments and 5:1 ARMs with another bank financing the down payment and the like, looks like we are headed for another crash.
bufmatmuslepants is offline   Reply With Quote
Old 02-23-2017, 06:02 AM   #17
TECH Fanatic
iTrader: (11)
 
Join Date: Oct 2005
Location: Chitown, IL
Posts: 1,631
Default

Penfed has it and it's called a payment saver loan. I have been using and doing this loan since 2007. I have at least 4 cars with them using this approach. Its not for everyone, you need to be on your game and its a cash flow play. It is no more predatory than a lease. It is up to you what you do at the end of the term. Penfed residuals are very conservative and you end up after five years w equity is typically how it comes together. Here is an example of. C 7 w 10k down and negotiating the sales price down.

Educate yourself on this and see if this is the right thing for you. With this approach you generally do not build equity as quickly as a standard payment BUT, I dont want to build equity! This is a way to use a car like a lease without complications of a lease.
Attached Thumbnails
Discussion about "balloon payments".-img_0652.png  
merim123 is offline   Reply With Quote
Old 02-23-2017, 07:58 AM   #18
Launching!
iTrader: (10)
 
Join Date: Jun 2008
Posts: 231
Default

Meh, it's a way to drive a car you can't afford. I would just be paranoid about not being able to sell it in time.
sw07gt is offline   Reply With Quote
Old 02-23-2017, 10:08 AM   #19
On The Tree
iTrader: (1)
 
'WHEELS''s Avatar
 
Join Date: Dec 2009
Location: Los Angeles, CA
Posts: 182
Default

It says right on the C7 example screenshot that the loan is only for new cars and cannot exceed 15k miles per year. How is it better than a lease?
'WHEELS' is offline   Reply With Quote
Old 02-23-2017, 10:49 AM   #20
TECH Veteran
iTrader: (17)
 
Puck's Avatar
 
Join Date: Oct 2006
Posts: 4,056
Default

Predatory lending, should be illegal. You are luring people into cars they can't afford by showing them monthly payments in their budget. People are procrastinators by nature, so that big 10k+ payment due 5 years from now seems like no big deal until its right around the corner and you're not even close to having the money so have to turn in the car you grew to love.

I have worked in sales for both electronics and cars...do NOT do balloon payments or introductory period loans. They are structured to reduce as much risk as possible to the bank, since it is a way for them to lend more money to you then their system would otherwise allow.

Personal story, not a balloon loan but an introductory period one: My very first financed vehicle ever was when I was an 18yo who though I knew everything. I already had one CC in my own name, and my parents had me as an authorized card holder on one of theirs so I graduated HS with a healthy ~700 score for an 18yo. I sold my 636 and ran to the Kawi dealer and basically just said "Get me 150/mo or lower payments and I'll walk out with a bike". I don't even remember reading all the paperwork - just saw the bright shiny 0 miles ZX6R Ninja and the $130/mo on the paper so signed in a heartbeat. They ended up giving me a structured 4yr loan where the first 2 years were like 3% and my payments were only around $130 a month. I got used to those tiny payments, time flew by, stupidly added more debt on things like car and PC parts, then all of a sudden promotional period expired and my tiny 130/mo payments almost doubled to $250/mo. I quickly realized my mistake, made extra principal payments until tax time(which was hard as a college student working part time) when I used my refund to pay the bike off 1-1/2 years early.To add salt to the wound, I realized they had added the whole terms worth of interest to my loan right on top, so even though I paid it off in 2 1/2 years they still got the full 4yrs of interest. Learned my lesson, paid it off, and never made that mistake again.

Now, imagine that scenario but instead of payments increasing, they send you a massive ******* bill at the end of a loan after getting used to small payments for month. That is how people get repo's, foreclosures, and **** up their credit.

Pro tip: If you can't afford the monthly payments on a standard loan, it is too expensive of a vehicle for you. Either A: Save a bigger down payment to lower amount financed, or B: Choose a less expensive vehicle.

Not trying to sound harsh, but take the majority's advice and do your research. I'm not saying it can't work for certain people, but for most it is NOT recommended.
Puck is offline   Reply With Quote
Reply

Related Topics
Thread Thread Starter Forum Replies Last Post
VA/FHA/Conv/Purchase Home Loans coltboostin Military Hotrod Club 36 01-15-2017 07:46 PM
wyotech blairsville pa? nazztman4739 Automotive Careers 32 05-02-2016 09:04 AM
Sell it or hold onto it? s7ven What is it Worth? 9 04-16-2016 04:56 PM
My 2004 CTSV + loan takeover for Fbody BoostedTurd Vehicle Classifieds 1 11-24-2015 07:03 PM


Thread Tools Search this Thread
Search this Thread:

Advanced Search

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off



All times are GMT -5. The time now is 04:36 AM.


 
  • Ask a Question
    Get answers from community experts
Question Title:
Description:
Your question will be posted in: