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Car loan with high final rate

Many car dealers also offer the right financing for their vehicles. Some financing models provide for a final installment. This is usually quite high and makes up a significant part of the total. What to look out for with a car loan with a high final rate is explained here.

Balloon financing

Balloon financing

A car loan with a high final rate is often called balloon financing in technical jargon. This is a financing model which on the one hand has very low monthly installments, but on the other hand comes up with a very high final installment. Many borrowers are often unaware of what this means when they take out a car loan with a high closing rate. Because in addition to the monthly installments, you still have to put some money aside for the final installment.

Month after month. If you do not do this, you will have to finance the last installment at the end. And that means that the car is far from debt free. It becomes particularly bitter if you still pay off the old car but actually need a new one. So what should you watch out for with a car loan with a high closing rate?

So nothing goes wrong

So nothing goes wrong

If you decide on this type of loan, you have to clarify very precisely in advance with the lender – usually the dealership – how high the last installment is. In addition, you should ask what options are there if the rate cannot be met from your own resources? Can a follow-up loan be taken out? Or can the car even be given in payment?

Follow-up financing is usually always possible. If the dealership does not offer this, you can get it from any other bank. However, the option to trade in the car should only be used if the car still has a corresponding value at that time. The outstanding amount must at least be covered. However, if you have to pay extra, the first variant should be chosen. This pays off and keeps losses low.

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