What is a Balloon Payment? | The dangers of Payment Deferrals for Cars and Mortgages

This video is applicable to all of the mortgage or can loan payment deferrals.
🗨Timestamps🗨

00:00 What is a Balloon Payment?
00:30 How Payment Works
02:08 The Risk of Balloon Payment
02:44 Balloon Payment vs. Lease Payment
04:59 Upside-down Car Return
05:32 Rolling in the debt
06:35 Commercial Mortgage

Balloon Payment or as Chrysler Used to call it “Customer Choice Financing.” What is it and why it is an absolutely worst way to finance anything. Another way it is called is Bullet Repayment and that is because it can be crippling to your finances.

It doesn’t matter if you take a car loan or a mortgage (by the way in a lot of countries’ residential mortgages that structured in this way are illegal).

The basic idea is the same: you need something right now like a car to get to work. Because you can’t get to work without the car, right now you don’t have enough cash flow to make payments on a traditional loan for say 3 years. You also don’t want to because of ultimately high-interest costs or don’t qualify for those crazy 96 months loans.

Dealership says no problem. What we are going to do just for you is that we are going to half of the price of the car and finance it over 36 months. This will give you the low monthly payment you can afford now. What is happening with the other half? Well, you would have to pay all at once in 36 months. However, you will have your job and of course, you would be able to pay half of the car price in one lump sum.
This works the same way with mortgages, except their collateral is real estate that can potentially be an asset, while the car is 100% liability.

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[otherryan]

Great video on explaining balloon payments, and the dangers of financing :O I recently bought a car in cash, just so I wouldn't have to deal with the hassle of a loan. Thank you for sharing!

[makesaveinvest]

Dealers are so sneaky!! I feel that place is like a trap!!

[PracticalPersonalFinance]

I've never learned about this type of financing before. It should definitely be illegal! People have that tendency to believe things will be so much better down the road than they will be.

[LifeWithVinceLuu]

Great insight on balloon payments; thanks for sharing! Keep up the hustle and keep up the videos!

[alexlegakov]

I was thinking of deferring my payment, will check it out!

[trinityrerekura]

Thank you for this awesome video. I’m unfamiliar with the financing world so having this video has just saved me from incurring unwanted risky debt!

[TradingWithCJ]

This was pretty interesting, great explanation! Also cool channel mate, just sub’d 👍🏼😌

[JenniferOviawe-bhlv]

It's much better if you are buying an asset. I don't think it makes sense if you are purchasing a liability. If you are going to pay the balloon payment towards your asset. You are still generating income. Hopefully your asset isn't in the time frame where maintenance is highly inevitable.

[RepentBTooLate]

Thank you very much for your help! You explain good!

[ЕленаРемень-пч]

Looking forward for it. I suppose it will be quite useful as usual

[ProjectInfluencers]

Great informative content. Thanks for the video man!

[zaidchalabi]

makes sense
i do it in my trucking business alot
its easy and quick to get loan buy trucks and have low payments and you put a small chunk of profit toward the balloon payment snd you just pay it at the end
still alot less interest overall than dealership and other equipment financial companies charging 20-25% interest for commercial equipment

[nastyabaradulkina]

Sounds intriguing. Will be back to check.

[JuliaChubarova]

There's gonna be something interesting🤔

[MrNysmoke]

I did a balloon 🎈 on my car for 5 years i only asked well after its up i dont need to pay a lump sum credit wise im excellent my question is should I just get a loan from my bank at the end i plan to keep my car i bought it in Feb so I'm just curious i rather pay lower interest so is it even possible to use my bank or does it need to be from dealership if I had to do a lump sum at end i would of said hell no..i see how its risky but I think I should of went with higher payments to save money but my wife said hell no lol should of did more research but either way in the car I love lol

[JarrodSampson]

Great video! I saw one of your comments and wanted to stop by and show my support. Keep the uploads coming and your channel will definitely grow for sure, I'll be watching! Stop by my channel and say hi when you get a minute, I'd appreciate it!

[genzinvesting]

This was a very interesting video
Great video
New subscriber here
Happy to support a fellow finance channel
Looking forward to continued interaction
Let's grow together
😀👍

[jimfigler]

What’s with the mug shots in the background

[manum]

STOP THIS CRAP TERMINOLOGY FIRST, AND USE TERMS WHICH ARE OBVIOUS