Are you looking for a good way to finance your car? Standard car loans are not the only solution. Using the so-called balloon loan, you can reduce the amount of monthly installments by up to 40%. Find out what this solution is all about.

The purchase of a new car is not always achievable for a statistical Pole. That is why Polish roads are used mainly by used cars - often in very bad condition. Modern ways of financing a car are meant to change this, as they reduce the monthly instalment, becoming a lesser burden on the household budget. As shown, for example, by Toyota Bank's SMARTPLAN loan offer, the loan instalment can be almost half as much as the standard car loan instalment.

Balloon credit, so what?

Balloon loan is a modern way of financing a car, which is becoming more and more popular - both among individual customers and entrepreneurs. Its characteristic feature is a high so-called balloon installment. This reduces the monthly instalments, while the last instalment is for example 20% of the value of the car.

Key concepts related to balloon lending

In order to better understand the essence of balloon credit, it is worthwhile to learn the most important concepts concerning this way of financing a car. In this way you will see whether this solution is beneficial for you.

Balloon installment

A balloon payment is the last high balloon payment corresponding to a portion of the value of a car (expressed as a percentage). This solution primarily increases creditworthiness and allows for a reduction in instalments.

There are several ways to pay the balloon installment, the most common being to sell a car to a dealer. The funds obtained in this way are used to repay the balloon installment, while the remaining funds are paid in as part of the equity capital for the purchase of another car from the showroom. In the case of Toyota cars, the high residual value of the vehicles allows the payment of the last instalment and the payment for a new car.

Own payment

Own payment is the amount required by the bank under the balloon loan granted. Its amount is set individually by a specific bank, e.g. at the level of 10% of the value of the car loaned.

Financing period

The financing term is the maximum time for which a loan is granted. It affects the amount of installments - the longer it is, the smaller the monthly amount of installments. In the case of a balloon loan it is usually 3-4 years.

Residual value

Residual value (residual/end value) means the value of the object (car) at the moment of its resale. This is the forecast amount that can be obtained for a vehicle after a certain period of use.

If you are thinking about buying a car, think about a balloon loan. This is a good solution when you want to use new cars regularly under manufacturer's warranty without burdening your home budget.

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