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If you want a car loan but want to keep the monthly repayments to a minimum, you may want to think about car loans with balloon payment. A balloon payment is a large lump sum that is made at the end of the car loan agreement, keeping the monthly repayments to a minimum. Car loans with balloon payment are suitable for people who:
- Are expecting a financial windfall i.e. tax refund, inheritance, dividend
- Are good at investing, and can take advantage of the loan type to save money
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Benefits of car loans with balloon payment include
- The deposit required is generally a lot lower
- Low interest rate
- Low monthly payments
However, car loans with balloon payment are not for everyone – if you do not have the money to pay off the loan at the end of the agreement and/or are not good at putting money aside to pay the final lump sum, you could end up in financial difficulties, so it can be a risky way to borrow.