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Balloon payment: Dangerous or heaven-sent?



2-3 min read (or seeing an outrageous price on a car and pretending you're still considering it)


If you’ve ever inquired about buying a new car, the salesperson might have offered you the option of a ‘balloon payment’. It sounds like such fun – a party! But what is a balloon payment? And is it a good idea when you’re financing the car of your dreams? Let’s jump in.

What is it?

Put simply, it’s a lump sum due at the end of a loan term. To illustrate the concept, let’s compare two car loans for R350,000 – one with a balloon payment and one without.

With no deposit and no balloon payment, and assuming an interest rate of 10.5%, the monthly instalment on the full amount would be about R7,600 over 60 months (five years).

still processing the fact that R350k(basically a Polo) is R7.5k pm for 5 years