Advertising has only one goal: to encourage people to buy. This should be particularly easy for advertisers with cars, because Germans have a very special relationship with their vehicles. But the dream of a new car and thus the willingness to buy fails for most people when looking at the bank account.
The average German wage is 1350 USD per month. This actually does not result in sufficient creditworthiness to finance the vehicle with a car loan, since one could not pay off the installments even with the maximum loan term. The solution to the problem is, at least when it comes to banks and car manufacturers, car loans with balloon financing.
The car loan with balloon financing: what is the meaning behind it?
A balloon loan car loan is a loan with a particularly high closing rate. What may not sound very tempting at first glance, becomes much more attractive when you take a closer look. The problem that keeps many people away from a loan with a large loan amount is the high monthly installments. These can only be pushed in one way: by significantly reducing the total loan amount. The simplest method in this regard is to simply divide the sum in the middle.
Anyone who has to pay back 10,000 USD instead of 20,000 USD over eight years is suddenly faced with a rate burden that they can shoulder. The rest of the money remains with the balloon financing for the final installment. Of course, the final installment must not simply be left under the table: There are three ways in which this can be repaid: payment, return of the vehicle or new financing.
The car loan with balloon financing: the repayment
The easiest way to repay the final installment is to simply pay it. To stay in the example above: After eight years, the last installment comes and you have the 10,000 USD, then it makes the most sense to simply pay it, because then the vehicle finally belongs to you, and you could also do it this way also get rid of all payment obligations. However, this variant only works for those who unexpectedly made money.
The car loan with balloon financing: the return of the vehicle
This variant is often referred to as a leasing model. It is agreed with the car seller that the vehicle, provided it is in perfect condition, can be returned at the value of the closing rate when the closing rate is due. The advantage of this procedure is that the loan has been repaid and there is no longer any debt. The disadvantage: you also no longer have a car. The monthly installments were actually just leasing fees.
The car loan with balloon financing: the new financing
This variant is chosen most often because it means that you can keep the car. The bank where you got the original funding offers you to get a new loan to pay off the final installment. However, the disadvantage for the borrower is that he pays off a vehicle for years (often up to fifteen years). In addition, the loan will become even more expensive, since, of course, follow-up financing is also fully due and, of course, also carries interest.