Thus, they will only take full ownership and receive the original eNATIS documents once the full balloon amount is settled.<\/p>\n\n\n\n
\u201cThat\u2019s why you need to think ahead when choosing to take a balloon payment. However, re-spreading can have its benefit. Consumers can choose to keep their repayments slightly lower than their current instalments,\u201d said Stead.<\/p>\n\n\n\n
Use a trade-in<\/strong><\/p>\n\n\n\n Consumers can still make additional non-contractual payments towards their VAF accounts, but they must explicitly state these payments are being used to offset the balloon amount. <\/p>\n\n\n\n The additional amounts will then be directed towards the principal debt, and the balloon payment will not be affected. <\/p>\n\n\n\n Another option, 96.5% of Standard Bank VAF customers who had a balloon used, is to trade in their vehicles before the balloon matures as part of their replacement cycle. <\/p>\n\n\n\n \u201cWhen this happens, the balloon is settled as part of the trade-in process. Thus, only 3.5% of our customers have had a balloon that required settling or re-spreading,\u201d said Glenn.<\/p>\n\n\n\n Balloons cost more in the longer term<\/strong><\/p>\n\n\n\n A balloon payment will then raise the total amount the consumer will pay at the end of their financing term. <\/p>\n\n\n\n If a customer buys a R200,000 vehicle at a 10% interest rate and opts for a 20% balloon, they will pay R10,000 more after six years.<\/p>\n\n\n This is because while the consumer pays interest on the principal debt, no payments are made towards the balloon amount.<\/strong><\/p>\n\n\n\n However, the interest on the balloon amount is also charged from day one.<\/strong><\/p>\n\n\n\n \u201cIf you don\u2019t want higher interest to accumulate on your balloon portion, you can make additional ad-hoc payments and ask your lender to allocate those towards the balloon,\u201d added Stead.<\/p>\n\n\n\n Risk profile <\/strong><\/p>\n\n\n\n Balloon payments are also expressed as the percentage of a vehicle’s total purchase price, excluding additional warranty or service plan costs. <\/p>\n\n\n\n The majority of banks allow up to a maximum of 40%. Still, not everyone will qualify for this maximum due to your qualification criteria considered part of the consumer’s overall risk, including factors like age and vehicle make. <\/p>\n\n\n\n \u201cIn Standard Bank\u2019s VAF\u2019s case, the only time we can approve a balloon payment over 40% is when the initial financing period is short \u2013 24 months or lower,” added Stead. <\/p>\n\n\n\n “We also look at the customer\u2019s affordability score and the car being financed. Where the car depreciates far slower than the typical vehicle that we finance, we may approve a balloon payment over 40%.” <\/p>\n\n\n\n Read: Big turn for real estate in South Africa as confidence jumps<\/a><\/strong><\/p>\n\n\n\n![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/06\/image003-2.png\")
<\/a>
\n\n\n\n