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How to Get a Balloon Payment Auto Loan with Bad Credit
When looking for a car loan with bad credit, a balloon payment auto loan may be what you need to be able to buy the car you want and have payments you can afford. The basic premise behind balloon auto loans for bad credit, or even good credit, is that for most of the length of the loan, they payments are quite low. Then, when the loan term is almost over, you will have to make one or two much larger payments to pay down the balance of the principle of the loan. In other words, if you have a 60 month loan, for 58 or 59 months you will be paying mostly on interest and a small amount towards the principle. The last one or two payments will pay off the principle. Most people that a balloon payment auto loan are considering auto loan refinancing after they build up a favorable payment history. There are four basic steps involved.
1: Consider the Options You Have
Try and get a co-signer so you can qualify for a lower interest rate. Consider a trade in or considerable down payment. Less principle means less to pay off and pay interest on. Do some research on car pricing and availability. If you want a luxury car, but can only afford payments on an economy car, it won’t make sense to try and negotiate a loan for a Cadillac CTS-V.
2: Shop around for Interest Rates
Be sure to look into lenders that offer “Sub-prime” rates. Lenders such as these are more likely to work with you if you have bad credit. Remember that if you are shopping for a balloon payment auto loan with bad credit, it won’t be worth it to you if you have to pay a high interest rate. Ask questions about and be sure to completely understand how much you will be paying in interest over the life of the loan. This way you won’t over extend yourself and end up too deep in debt to climb out. You’re trying to repair your credit, not make it worse.
3: Work with the Lender to Make the Loan as Favorable as Possible to You
A number of people looking to enter into balloon payment auto loans have one of two options in mind for the end of the loan. One option is auto loan refinancing. Some people enter into this type of loan because they have some investments that are due to mature near the end of the loan term or some other large cash inflow that they plan on using to pay the loan off. If this is your plan, make sure you tailor the loan so that the balloon payment comes due shortly after receiving your cash windfall, this way you don’t end up paying more in interest than you have to. Remember, the longer the term, the more you end up paying in interest.
4: Pay off Your Loan
What is most important in the end is that you have the means to make all the payments that are due on your loan, from the first small payments to the large balloon payment at the end of the term. You don’t want to come to the end of the loan and find out that you can’t afford to make the final payments. Always be sure you have a backup plan in case something goes wrong with the original.
As long as you pay attention to some basic pointers, finding the balloon payment auto loan with bad credit that fits you will be a relatively easy and painless experience.
