Boat Loans Australia Articles

Put a Balloon Payment in a loan with the 6 steps to keep the loan profitable and safe

What is a balloon payment?

You take out a loan for goods or equipment.    Your monthly loan payment is half of what they should because the last payment of the loan is  a large portion of the total loan, called a balloon payment.  It is a deferred loan payment. Handled correctly in a loan , a very smart thing to do.  Mishandled in a loan, real headaches.   6 steps to keep it smart

• You want to buy goods or equipment and loan  finance the purchase. 
• You are quoted a monthly loan repayment and it seems high to you. 
• You are then told the loan repayment can be halved and you can have a balloon payment at the end of the loan.
• So you enter the loan agreement thinking you are getting what you want, at a very low monthly payment. 
• Sadly, many  buy balloon loan payments like this and set themselves up for a financial nightmare at the end of the loan lease

Here is why.

The loan lease they have signed could be as follows.   Value of loan $30,000, 36 months, interest and principle payments on $15,000 and one last payment to completion the loan of $15,000.

Assume that you have worked the goods very hard and they are about three quarters through their life span and have been significantly depreciated.  You check the market and you can buy your goods for $7,000 in the second hand market.

You have to come up with $15,000 for the last loan payment.  Take the situation that you do not have the $15,000 to make the last loan payment.  You will be confronted by two options

Option One

What is a value of the goods?  $7,000.  You do not have the $15,000 so you take out a $15,000 loan to pay for goods of $7,000?

Option two

You sell the goods at $7,000 and take out a loan to pay the $8,000 off the loan Balloon payment.  Now you are paying for goods you do not own!

How do you avoid these traps?

If you knew someone who was in this situation how would you rate their ability as a business person.  It is amazing how many people get caught up in  having to pick option one or option two.   So how do you avoid getting caught?  It is quite easy.

Step One

Look at the goods that you want to buy.   Now take a same type of goods that were being sold three years ago.   The model may be superseded but try and find out what you would have paid for it then.   There is a value in keeping old catalogues.

Step two

Look at the second hand market for that model of goods. Divide the goods into three categories.

• Light use.
• Medium use.
• Heavy use

 How much is each category currently selling for today?

Step three

Work out what the value the goods have depreciated in the period. If it was sold for $10,000 and is now $5,000 it can be assumed  that it will lose its value by 50% in three years.   The numbers may change but the general % value should not.  It may be that the value rises in which case there would be a benefit to you.

 Step four.

Now look at the goods you want to buy today. Assume that the value of the goods in three years time would be based on past performances. The price has now fallen in purchasing new goods to $7,000, you then estimate the selling price for them in three years to be  $3,500.

Step five

In the loan lease agreement  you  pay $7000.   You have a balloon loan payment of $3,500.  Remember this is the final payment of the loan. You have much lower loan monthly payment  as you are only paying monthly loan payments on the $3500.   At the end of three years you have paid off the $3,500 from your monthly loan repayments, you sell the goods, and pay out the  loan balloon last payment of $3,500

Step six

You now repeat the process and purchase the latest goods by repeating the same process.

You are getting the goods at a lower loan monthly cost than your competitors and you are always maintaining your competitive edge because you are using the latest technology.

This article is a very high level explanation.  Be sure that you get the correct investment and taxation advice before proceeding.  A Mortgage Broker can introduce you to lenders who can arrange finance for you.

Finance Articles

Double your deposit in half the time Saving is never an easy thing to do and saving for a deposit on a home is twice as hard. However, with the right strategy in place, your savings can grow and grow, cutting... read more Is now the right time to refinance your home? So, interest rates have changed since you took out your home loan and you think it could be time to refinance your existing mortgage? But the entire loan application process... read more Buying a home when rates go up When rates go up, opportunities abound. You see, many homeowners, builders, and developers, find themselves in more negotiable positions because of the laws of supply... read more Guide To Personal Loans For Debt Consolidation You can qualify for personal loans for debt consolidation even with bad credit. In fact, debt consolidation loans are meant to help people with bad credit rebuild their... read more Getting Rid of Your Debt Troubles People borrow for a variety of reasons. But as long as they are able to meet repayment obligations, things are fine. Trouble erupts when commitments go awry and payment... read more Where To Get A Debt Consolidation Loan When You Have Bad Credit If you find yourself struggling under the weight of multiple loans, credit cards and other personal debts it can be hard to know where to turn for help. Your lenders may... read more

Finance News

Personal Loans to help Australians in need: FSO Oct 29 :: As Australia prepares to clean up following devastating fires and floods, Financial Services Online CEO, Andrew Clark, has announced a package of personal finance solutions... read more Small business loans to help Aussie businesses through tough times Nov 27 :: Financial Services Online has today announced a new credit facility for Australian business customers who are seeking loans for amounts of up to $10,000 with minimum security... read more Police issue warning about bank scam Nov 20 :: Melbourne police are warning people about a scam in which fraudsters pose as bankers and ask for money.They say they cold call customers and tell them they have... read more

APPLY HERE

One simple enquiry form gives you fast, easy access to rates and product research from a selection of the nation`s leading and best known Boat Loans professionals.

Knowledgebase

Guarantor:
A party who agrees to be responsible for the payment of another party's debts should the original party fail to pay or perform according to a contract.