What is a balloon car loan, and how does it work?

I'm expecting an inheritance about a year from now after it goes through probate court. I also want to buy a car, and my dad suggested a balloon car loan. What is it, and how does it work?

Answer
A balloon car loan is a type of car loan that’s structured so that you make one final lump-sum, or balloon payment, at the end of the loan. This means that you can pay lower monthly payments for most of the loan term, but you’ll have to make a final large payment when you get your inheritance.
Although balloon car loans are rare in the auto industry (they’re much more common in the mortgage world), they still provide a service that can help you get the car of your choice. Make sure to read through your contract to find out the terms of the balloon payment—you don’t want to get caught off guard by a payment that’s thousands of dollars.
To protect your investment during and after the loan, sign up with the Jerry, the car insurance comparison and broker app. With Jerry, you can search and compare dozens of car insurance quotes to get the best rate on the coverage you need.
Eric Schad
Answered on Nov 15, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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