Payment Saver "Balloon" Loans - Page 3 - Camaro5 Chevy Camaro Forum / Camaro ZL1, SS and V6 Forums

Chief762x39 · 06-20-2009, 05:56 PM

Is PenFed my only option for a payment saver loan? I'd like to compare what they offer to some other companies before making a final decision. So far they are the only credit union I've found that offers it.

JDBeck23 · 06-20-2009, 06:41 PM

They're the only one I've seen too Chief. I was hard pressed to find a lower rate than Pen Fed... so im not sure you're going to be able to do better. And their online banking is really easy once you set up. It took me about 30 seconds to save my primary checking account as an external transfer account. So that was really nice, as im only going to be using Pen Fed for the car loan.

JDBeck23 · 06-20-2009, 06:43 PM

oops double post!

phiz118 · 06-22-2009, 01:18 AM

Quote:

Originally Posted by 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!

I'm really not sure how this is different from a lease. In a lease, you are protected, but in a payment saver loan you are not. You are right about cars being bad investments, and as long as you are earning over 4.25% on the money you could use to pay it off, then you are ahead.

songsj · 06-22-2009, 02:01 AM

Your loan may be at 4.25 but you really need to look at the effective yield or effective annual percentage rate. You probably will find that you are actually paying more than 4.25.

Wareal · 06-22-2009, 07:23 AM

This is an attractive way to buy a car for the reasons stated--a car is a depreciating asset.

Leased vehicles are owned by the lender and will have a mileage component. In addition, a modified leased vehicle may be a problem at the end of the lease. The money factor of a lease would equate to an APR much higher than 4.25%. Get gap ($200) and you should be fine. The car will have a value when the balloon is due. Lenders use averages when computing the balloon amount, so the car should be worth the balloon amount, at least. You can sell the car when the balloon comes due and pay off the balloon with the proceeds.

In this scenario, as an owner, you can sell the vehicle at any time. Conversely, in a lease, you can buy your way out at any time, but it will cost you.

Like a lease, this is a pay-for-use method, except, as an owner, you have more options.

phiz118 · 06-22-2009, 04:18 PM

Quote:

Originally Posted by songsj

Your loan may be at 4.25 but you really need to look at the effective yield or effective annual percentage rate. You probably will find that you are actually paying more than 4.25.

You would also be making more due to compound interest. I think in the end it will equal out.

MarylandSpeed · 03-25-2010, 05:58 PM

GM used to have a smart buy program with a ballon payment. With them, when the last payment was due, you could either return the car for $200 fee, or pay it off. I did this a few times on my DD's and it worked out good. Basically, they figure out a residual value of the vehicle at the end of the loan, and difference between that purchase price is what get's financed. The main advantage of smart buy vs. a lease was that the car was titled in your name instead of the leasing company and much easier to trade in or do what you wanted with.

I WOULD NOT however do a ballon payment loan without the option to return the car when the balloon was due.

06-20-2009, 06:41 PM	#30
JDBeck23 Drives: 2010 Camaro, 2SS/RS Join Date: May 2009 Location: King George, Va Posts: 881	They're the only one I've seen too Chief. I was hard pressed to find a lower rate than Pen Fed... so im not sure you're going to be able to do better. And their online banking is really easy once you set up. It took me about 30 seconds to save my primary checking account as an external transfer account. So that was really nice, as im only going to be using Pen Fed for the car loan. __________________ 2010 2SS/RS CGM American Racing Headers, Magnaflow axle back, Roto-Fab CAI, Audio Integrations Sub box, Alpine Type R 10, Alpine MRP-500 amp, Pro Clips iPhone Mount

06-20-2009, 06:43 PM	#31
JDBeck23 Drives: 2010 Camaro, 2SS/RS Join Date: May 2009 Location: King George, Va Posts: 881	oops double post! __________________ 2010 2SS/RS CGM American Racing Headers, Magnaflow axle back, Roto-Fab CAI, Audio Integrations Sub box, Alpine Type R 10, Alpine MRP-500 amp, Pro Clips iPhone Mount Last edited by JDBeck23; 06-20-2009 at 06:44 PM. Reason: double post

Similar Threads
Thread	Thread Starter	Forum	Replies	Last Post
What are the pluses/minuses of financing using payment saver plan?	edog	Camaro Price \| Ordering \| Tracking \| Dealers Discussions	5	05-06-2009 09:39 PM
White House Approves $17.4 Billion Auto Loans to GM & Chrysler	josh1147	General Automotive + Other Cars Discussion	97	12-29-2008 03:21 PM
MERGED: Has anyone read this (bankruptcy) about GM?	LS3SSRS	General Automotive + Other Cars Discussion	460	11-23-2008 11:54 PM
Payment and Shipping info for 1st Edition Camaro5 shirts	TAG UR IT	Camaro5 Store Merchandise	154	10-18-2008 04:00 AM
Americans increasingly going upside down on auto loans	Scotsman	General Automotive + Other Cars Discussion	12	01-03-2008 12:48 AM

06-20-2009, 05:56 PM	#29
Chief762x39 Drives: 1999 Firebird Trans Am Join Date: Jun 2009 Location: New Mexico Posts: 13	Is PenFed my only option for a payment saver loan? I'd like to compare what they offer to some other companies before making a final decision. So far they are the only credit union I've found that offers it.

06-22-2009, 02:01 AM	#33
songsj Drives: 2015 2SS/RS Summit White Join Date: Nov 2008 Location: MPLS Posts: 798	Your loan may be at 4.25 but you really need to look at the effective yield or effective annual percentage rate. You probably will find that you are actually paying more than 4.25.

06-22-2009, 07:23 AM	#34
Wareal Drives: 911 Join Date: May 2009 Location: Virginia Posts: 74	This is an attractive way to buy a car for the reasons stated--a car is a depreciating asset. Leased vehicles are owned by the lender and will have a mileage component. In addition, a modified leased vehicle may be a problem at the end of the lease. The money factor of a lease would equate to an APR much higher than 4.25%. Get gap ($200) and you should be fine. The car will have a value when the balloon is due. Lenders use averages when computing the balloon amount, so the car should be worth the balloon amount, at least. You can sell the car when the balloon comes due and pay off the balloon with the proceeds. In this scenario, as an owner, you can sell the vehicle at any time. Conversely, in a lease, you can buy your way out at any time, but it will cost you. Like a lease, this is a pay-for-use method, except, as an owner, you have more options.

03-25-2010, 05:58 PM	#36
MarylandSpeed Account Suspended Drives: 2012 ZL1 & 2010 2SS/RS Join Date: Jul 2009 Location: Maryland Posts: 3,378	GM used to have a smart buy program with a ballon payment. With them, when the last payment was due, you could either return the car for $200 fee, or pay it off. I did this a few times on my DD's and it worked out good. Basically, they figure out a residual value of the vehicle at the end of the loan, and difference between that purchase price is what get's financed. The main advantage of smart buy vs. a lease was that the car was titled in your name instead of the leasing company and much easier to trade in or do what you wanted with. I WOULD NOT however do a ballon payment loan without the option to return the car when the balloon was due.