Car loans and balloons

Car loans and balloons. Anyone heard of the word balloon? Hey, it's Aaron from Diagnostics and Finance. There's a fancy topic that comes up when we go to buy cars with finance, and that is we already know it's going to be car loan or car lease or shadow mortgage. If you haven't heard of shadow mortgage, that is for a later date. And we also hear of the word balloon or residual amount. So let's unpack this. A balloon is an amount of money that is left unpaid over the course of your car loan. At the end of the loan, you're either going to trade in your car and get a new one and extinguish or pay out the balloon, or you're going to pay out the balloon in one lump sum at the end of the term. What I find commonly when I'm helping people out that need my help at the end of their car loan is that they don't have the money for the balloon. Or another commonality is that when they've gone for the loan, they may not have realized or the salesperson hasn't totally put forward to them that they're going to have a residual amount at the end of the term of the lease or the car loan. So when you're entering into a car loan, please make sure that you understand if you've got a balloon, you're going to have to save a little bit more money up over the period of time. Or a better way to think about it is to look at the repayments of the car loan without a balloon. So whether you're going into a car loan with a balloon, make sure you've got your eyes wide open to be able to pay that out at the end without financial difficulty. And for people that don't have a balloon, go eyes wide open as well is that your repayments will probably be a little bit higher, but you won't have to pay anything further at the end of the loan term, except for the minor discharge fees that are usually built into every home loan. Not home loan, car loan, and they're built into home loans as well. So don't get caught with your balloon payment. If you feel like you've got a balloon payment or a residual and you just need some help in regards to how you can manage that when the end of the term comes up, please do reach out. There's a few different options related to finance that we can help you out with. Some people look to their home loan and some people look to further funding through or via their car. Hey, it's Aaron here. If you've got any questions, please do reach out.