For the purchase of a car, many car buyers first of all the use of the cheapest possible financing comes first. In this context, offers the car loan with down payment. This car loan with variable final installment is a special type of financing, also known as balloon financing, which in the vast majority of cases reduces the burden of due repayment installments.
How the car loan works with down payment
The car loan with down payment is usually accompanied by a closing rate. Borrowers make a down payment in different amounts, which reduces the amount of funding. Monthly installment payments are usually very low and can not cover the total at the end of the repayment term, so a closing rate between the seller and the consumer is agreed. The amount of this depends on the monthly installments and the deposit amount. A car loan with down payment is recommended if, on the one hand, sufficient funds are available for the down payment and, on the other hand, the running rates for the borrower are low. Basically, the installments during the term are reduced by both the down payment and the final installment. Experts speak of a “subdivision into three loan phases”.
The financing of the final installment
If the car loan with down payment is at the end of its term, the final installment is due. Consumers can then decide whether to repay the amount due in one installment to the lending institution or to arrange follow-on financing with the bank. Alternatively, the borrower may decide to sell the vehicle and settle the remaining debt with the proceeds. However, there are risks associated with this option: Anyone who chooses this option should definitely plan for the depreciation of the vehicle as well as any accidents in his calculations. Consumers who choose to take out a follow-up loan should once again pay attention to obtaining favorable credit terms.
A good way to reduce monthly burdens
The car loan with down payment is an attractive opportunity to finance your dream vehicle, especially because of its low monthly installments. Taking account of the down payment and the final installment, the burden can be well balanced with your own budget, so that the risk of over-indebtedness can be reduced to a minimum.