There are many ways to finance a car. A popular form is the car loan with a residual rate, also known as balloon financing. The special thing about this financing is the low rates that make financing possible. But such a loan is not cheap. But otherwise, many cannot afford to buy the vehicle in installments. A summay is on thebluehighway.com
How it works
With a car loan with a residual rate, only partial financing is achieved. At the end of the term, the residual rate is paid, which is based on the residual value of the car. For borrowers, this means that they have to pay lower rates.
In return, however, the residual value is due in one sum. It should also be borne in mind that the interest for such a loan model is higher than for a normal installment loan. Nevertheless, many car buyers choose it because they cannot afford the rates for a conventional loan and still do not want to do without the car.
The level of the rates is an important decision criterion for many
With a car loan with a residual rate, the amount of the monthly installment plays a decisive role. That is why car buyers are happy to accept that interest rates are significantly higher. But basically that is justified. Finally, the deferral of the remaining amount is financed until the end of the term. Therefore, the higher interest rates should not really be seen as a disadvantage, because the car buyer finally gets something for it.
But some buyers do not even pay attention to “such little things”, because the amount of the monthly rate is far too important for them to think small now. But the fundamental question is whether a car is used at all. More and more people are moving back to the city.
There is plenty of public transport there, which is not cheap, but is still considerably cheaper than a car. The legitimate question therefore arises whether a car loan with a residual rate is required at all. For people who depend on it professionally, this is more the case. Public transport is open to all other city dwellers.