Payment Saver "Balloon" Loans

[wullger]

I suppose. I'd rather just take a longer term conventional loan (say, 60-72 vs 48 or something like that), put the savings aside from that, and use it to pay the note off early.

[phiz118]

Do it! I love those repo shows on TV.

[phiz118]

Originally Posted by kdoske

lol, yeah thats usually the case. The only other senario is to sell it at the end of the 5 years. According to this calculator you would owe $13,582.71. So if at the end of 5 years if you can get $13,582.71 for a $32,000 car then you will be free and clear.

I'm not going to do it because it scares me, but there is definitely potential there if you play your cards right.

That would be called a lease. And you are protected that way.

[DDustiNN]

Originally Posted by kdoske

I'm pretty sure most places wont issue a balloon loan unless you have fairly good credit due to the risk involved for both parties.

PenFed turned down my application for a payment saver loan, but Chase pre-approved me (72-month term) almost instantly. Do you think PenFed would've let me get the regular loan? I didn't realize that the credit makes a difference regarding the type of loan.

[Vash]

The ballon thing is like a lease. Chase 72? there is no way you got even close to Penfed's traditional loan rates.

They should of told you that it requires super high credit and probably being a member with several loans already paided off to qualify for that. As others have said it would be a bad lending practice.

I think Penfed should of told you that it was hard to get approved for that type of loan.
Now you have a FICO hit that will stay on your record for 8 years.

Good luck.

[DDustiNN]

Originally Posted by Vash

The ballon thing is like a lease. Chase 72? there is no way you got even close to Penfed's traditional loan rates.

They should of told you that it requires super high credit and probably being a member with several loans already paided off to qualify for that. As others have said it would be a bad lending practice.

I think Penfed should of told you that it was hard to get approved for that type of loan.
Now you have a FICO hit that will stay on your record for 8 years.

Good luck.

This is my 5th new car loan (including leases), I've had multiple credit lines from various places (Dell, Best Buy, etc.) which I paid off, and I've never missed a payment on a single one. The only negative thing I had was one late payment that my dad made on a joint Best Buy card in February. The account is in good standing, and PenFed reps even told me that one late payment is no big deal. I explained this to them, but it made no difference. I really don't know what their problem was, but they sure were being stingy about it.

I just went to Chase afterward because I have my checking, savings, and credit card through them. They've been a breeze to deal with so far.

[Treadstone]

Penfed approved me for both regular loan and balloon. I decided to go with USAA though.

[JDBeck23]

Those who are "scared" of this type of loan are simply unaware of the fine points of Pen Fed's loans compared to the fine points of "balloon" mortgage loans that so many people got burned on.

Balloon Mortgage loans have a low interest rate in the beginning and then BALLOON to market rate + an agreed upon additional point or 2 at a certain timeframe, 2 years, 5 years, etc.

The initial, low interest rate sounds great, and your house payments being so low is an evil tempter and proved really dangerous for many people, who have now lost their houses because of it.

Pen Fed offers a "Payment Saver" loan, this is not a "Balloon" type loan because the interest rate NEVER changes! It's a low, 4.25% for up to 60 months. The benefit of this loan is that if you dont want to put a large down payment to get an equivalent monthly payment, then this loan is an excellent option. You can put a small down payment, finance the car for 5 years and either add additional money to the car loan each month as you can afford. Or wait until the loan is at it's term end, and pay the remainder of the loan off. Lastly, you can always choose to refinance the remainder of the loan amount when the loan terminates.

I personally im using this loan from Pen Fed because I have the cash to almost buy my camaro out right... but cars are LOUSY investments. So Im choosing to finance the car with the most manageable payment and the least money down. If 5 years down the road comes and I still love my car, then I'll pay it off then, or refinance. There's no secret tiny writing that Pen Fed will use down the road, 4.25% is what you get for the length of the loan. That was better than my Credit Union's best rate at 60 months. It was a win win for me.

Sorry, off the soap box!

[Vash]

lol Those scared. Can we keep it on technical topic and avoid insults? People ask advice on a public forum they expect some perspectives and some of us just happen to keep tight books. We try to help look out for people man it's not negative. It's consumer activism, thrift and security.

I could care less about emotion it's a car and a loan (till the person get's the car then it's love).

The ballon is just a bad idea and it's a poor lending practice in todays economy.

That's just my opinion.

[novajess1972]

Originally Posted by Chief762x39

Does anyone know of anywhere other than PenFed that has auto loans with a balloon payment? Basically its a loan with a reduced monthly payment, but has a balance that must be paid or refinanced at the end of the loan.

What's the diff between a balloon and a lease? Are they the same with the diff being that a BALLOON is offered through a CU or other outside lender while a LEASE is through the manufacturer GMAC or whomever?

[joepitt]

It's probably used by folks who trade often and may be an option to leasing since that has dried up. If you put a good chunk down and figure on trading in 2-3 years it may make sense.

[JDBeck23]

Originally Posted by Vash

lol Those scared. Can we keep it on technical topic and avoid insults? People ask advice on a public forum they expect some perspectives and some of us just happen to keep tight books. We try to help look out for people man it's not negative. It's consumer activism, thrift and security.

I could care less about emotion it's a car and a loan (till the person get's the car then it's love).

The ballon is just a bad idea and it's a poor lending practice in todays economy.

That's just my opinion.

I wasnt insulting anyone. I didnt quote anyone's post and call them scared. I put scared in quotations because I couldnt think of a better word at that particular moment.

I believe my post was offering a perspective and trying to inform more about the purpose of the loan and to shed some light on rumors and hearsay that some may have heard.

A balloon loan WOULD be a poor lending practice, but this isnt a balloon loan. As I stated before, the Pen Fed payment saver loan is not a "Balloon" loan. The interest rate never changes. There is nothing shiesty or underhanded. This is just a car loan. If you dont want to put a huge down payment at purchase time, but still want 400 a month payments at a 60 month term. Then it's a great alternative.

The only negative with this type of loan is that you run a high likelihood of being upside down on your car loan should you be in an accident and your car be totaled. But Pen Fed offers free GAP insurance with the loan. So that's covered too.

Not trying to be argumentative. Just stating the facts.

Chief, I went with a payment saver loan. If you have cash in your savings account and want to keep it there, then it's a great loan!

[JDBeck23]

Originally Posted by novajess1972

What's the diff between a balloon and a lease? Are they the same with the diff being that a BALLOON is offered through a CU or other outside lender while a LEASE is through the manufacturer GMAC or whomever?

The difference would be that you are not held to a contract of ownership. You dont have to keep the car for XX number of years before opting to buy, or trade it in. You can sell whenever, the car belongs to you, with a lien from the bank.

So it's kinda like a lease, yes.. but with more freedom to sell, or trade in whenever you want.

[Chief762x39]

Originally Posted by JDBeck23

I wasnt insulting anyone. I didnt quote anyone's post and call them scared. I put scared in quotations because I couldnt think of a better word at that particular moment.

I believe my post was offering a perspective and trying to inform more about the purpose of the loan and to shed some light on rumors and hearsay that some may have heard.

A balloon loan WOULD be a poor lending practice, but this isnt a balloon loan. As I stated before, the Pen Fed payment saver loan is not a "Balloon" loan. The interest rate never changes. There is nothing shiesty or underhanded. This is just a car loan. If you dont want to put a huge down payment at purchase time, but still want 400 a month payments at a 60 month term. Then it's a great alternative.

The only negative with this type of loan is that you run a high likelihood of being upside down on your car loan should you be in an accident and your car be totaled. But Pen Fed offers free GAP insurance with the loan. So that's covered too.

Not trying to be argumentative. Just stating the facts.

Chief, I went with a payment saver loan. If you have cash in your savings account and want to keep it there, then it's a great loan!

Thats exactly why I am considering it, I can afford the down payment and monthly payments of a normal loan, but if I can make them lower and put down less cash I can use the saved money for some other projects I'm working on.