When buying a car, many car buyers first of all take advantage of the best possible financing as the top priority. 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 most cases keeps down charges due to due repayment installments .
How the car loan works with down payment
The car loan with deposit is usually accompanied by a closing rate. Borrowers make a down payment of varying amounts, which reduces the amount of funding. Monthly installment payments are usually very low and can not cover the grand total at the end of the repayment term, so a closing rate is agreed between the seller and the consumer. How high this is 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 rates 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 decide at this time whether to repay the amount due in one installment to the financing 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: If you opt for this option, you should definitely plan for the depreciation of the vehicle as well as any accidents in your calculations. Consumers who decide 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 car, especially because of its low monthly installments. Taking into account 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.