| If you are looking for a loan that allows you | | | | Although lower payments are a great idea, you |
| to borrow a large amount of money over a | | | | need to remember about the balloon payment at |
| short amount of time but with low monthly | | | | the end of the loan. If you borrow a large |
| payments, then you should consider getting a | | | | amount of money, you will likely have to pay |
| balloon loan. Balloon loans can be used to | | | | a hefty amount at the end of the term. |
| reduce your monthly payments whilst still | | | | Although it might seem enticing now to have |
| borrowing the amount of money you require. If | | | | low payments, it might be very different when |
| you want to know what balloon loans are and | | | | you owe 5,000 or more in one payment. Think |
| when you should use them, then this article | | | | carefully before applying for a balloon loan |
| can help you to learn more. | | | | about your ability to afford such a large |
| | | | final payment. |
| What are balloon loans? | | | | |
| | | | Who should consider balloon loans? |
| Balloon loans are basically loans that are | | | | |
| agreed for one term, but are calculated over | | | | Balloon loans are good for people who know |
| another term. For example, you might take out | | | | their income or monetary situation will |
| a five-year balloon loan, but it is | | | | greatly improve within the next few years. If |
| calculated over 15 years. This means the | | | | you cannot afford large payments right now |
| monthly payments are going to be very low. | | | | but know that in 2 or 3 years you will have a |
| However, at the end of the five-year term, | | | | lot more money, then a balloon loan could |
| you need to pay off the final balance in one | | | | work well for you. However, you do need to be |
| large balloon payment. | | | | fairly certain that your situation really |
| | | | will improve. |
| Lower payments | | | | |
| | | | Refinancing |
| The main advantage of a balloon loan is that | | | | |
| for the loan term you get extremely low | | | | If you come to the end of the loan term and |
| monthly payments. If you are looking to | | | | find that you are unable to afford the |
| borrow a large amount of money but cannot | | | | balloon payment, you might be able to |
| afford large monthly payments, then a balloon | | | | renegotiate the loan terms and pay off the |
| loan might be a good idea. With a balloon | | | | rest of the loan in the normal way. Although |
| loan you can borrow large amounts of money | | | | terms for this will vary, refinancing at the |
| with the advantage of low monthly payments, | | | | end of a balloon loan is often possible. |
| yet you do not have the extra costs of | | | | However, this will end up costing you more |
| interest on a loan that lasts 10 or 15 years. | | | | money, so if you are unsure about your |
| | | | ability to afford the balloon loan go for a |
| Affording the balloon | | | | regular loan instead. |
| | | | |