Contact Us

(02) 6061 4599


13/495-499 Dean St Albury NSW 2640

Online Enquiry

* Required fields

Balloon Car Loans Vs Standard Vehicle Finance

Posted By  
10:43 AM

If you’re planning to buy your first car, you may be all pumped up and excited. In today’s age, buying a car is no big deal. Thanks to the various loan options that you can rely on. You don’t really have to save up all your life to be able to buy a car. You can now approach any bank, auto dealer, or lender to help you with car financing, and you can then pay back in instalments over a period of time. Convenient, we know!

Now that you’ve made up your mind and are looking into your options, you’ll come across two primary types of car loans; balloon car loans and standard vehicle finance. While both of these options will offer you flexibility over a set period of time, they’re both quite different.

This blog post is focused on helping you understand each of the two options so that you can decide which type of car loan will suit you best.


Balloon Car Loans

In balloon car loans, you’re required to make a balloon payment at the end of the loan term other than the monthly repayments. A balloon payment is a lump sum amount that you’ve got to pay in one go after the loan period ends. By the time your balloon payment is due, you’ll already be done with a major portion of your loan repayment.

One of the biggest reasons why balloon payments are one of the best options is that this type of car loan has lower monthly instalments. You won’t find any banks offering the option of balloon car loans. Mostly non-bank lenders and auto dealers offer this option. In this type of car loan, your lender will set a fixed percentage for balloon payment that you’ll have to pay after your loan term ends. You pay lower instalments to pay the remaining loan value plus the interest plus any fee the lender may charge. You can negotiate the percentage of balloon payment with the lender.

When the loan term ends, you’ll have two options; either you can make the payment and get the car transferred to your name or sell the car and make the payment. If you choose to return the car to the lender or trade-in with a new car, you’ll have to pay an additional fee for the service.

While balloon car loans seem like a better option with lower monthly instalments, you’ll actually end up paying way more than the actual amount you loaned. That’s because, with lower instalments, the amount remaining to be paid will be more as compared to when you’re paying higher monthly instalments. With that, the interest rate that’s charged on the remaining amount will also be higher.


Standard Vehicle Finance

This type of auto financing is what your bank would offer. With standard vehicle finance, you get a loan for the car at a fixed interest rate. You’ll also have to pay the bank’s fee. You’ll be required to repay the bank in instalments. In this type of auto financing, the monthly repayments are higher. Although it may seem like a bad thing right now, it’s actually good in the long run. The amount of interest will be lower, and you’ll be repaying lesser than you would have to repay in case of balloon car loans.


Balloon car loans are suitable for people who either don’t mind paying a much higher amount than they borrowed or have got sufficient free cash to make for the balloon payment. It’s also best suited for people who plan to sell their car or trade their car with a new one at the end of the loan term. Standard auto finance, on the other hand, is a more reliable and better option. However, it all comes down to your preferences.