Car loan with final installment.

 A car loan with a final installment is also called balloon financing. This type of loan is very popular because every conceivable purchase price can be included and protects the budget. Anyone who decides on a car loan with a final installment should be well informed in advance and make comparisons. This loan is often offered by car dealerships, so that the loan can be applied for when buying a car.

How does the loan work?

How does the loan work?

A car loan with a final installment always works the same way. At best, a partial amount is initially paid. Then monthly installments are repaid and at the end of the term there is the final installment. The closing rate is usually as high as the residual value of the vehicle. Depending on the model, the closing rate can vary.

Before concluding the contract, you should consider whether you can really afford this final installment. Basically, the borrower has to put some money aside every month so that they can pay off the final installment. He won’t really save.

What needs to be considered?

What needs to be considered?

With a car loan with a final installment, it must always be borne in mind that the monthly installments are very low. This means that the loan cannot be repaid quickly, so that the debt remains for a long time. As a result, interest rates are not very low and the loan can become very expensive.

The final installment must always be paid at the end of the term, otherwise the vehicle remains in the dealership’s possession and a new loan may have to be applied for. These loans should definitely be compared, because since the interest rates are already very high, only offers with low interest rates should be chosen.

Advantages and disadvantages

Advantages and disadvantages

The advantage is the low monthly installments that have to be paid. In this way, the loan does not burden the household budget too much and the borrower knows exactly what monthly costs he has to bear. Another advantage of a car loan with a final installment is that the down payment is very low.

Some car dealers even agree that no down payment has to be made. Disadvantages are that the loan runs for a long time. In time, the vehicle loses considerable value, especially in the first two years.

If you then decide to sell the vehicle, you have to expect a high loss. Anyone who finances a used car in this way is well advised with this loan. However, this financing is rarely worthwhile for new cars. Only if the vehicle is to remain in the borrower’s possession should the loan be selected with the final installment.

Personal Loan Truths to Lose Fear of Applying for Credit

There are still many myths about personal credit in Brazil and much is due to the country history of abusive interest rates and poor financial orientation to the population. The Brazilian has a love-hate relationship with personal credit. Despite being considered as a way to hurt the budget and a debt generator, the loan remains one of the main means to close the month in blue.

If used well, it can not only help pay off debt, but also represents a major shift your business needs to expand, for example. Like everything involving financial health, the decision to borrow should be carefully analyzed, with clear and achievable goals set. To lessen this bad stigma surrounding loan applications, let’s talk about some myths surrounding this credit model?

1. Loans Are Always Bad

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When we are in a very critical financial situation, we often get lost in the interest rates charged on different slips. At some point, we do not understand what you are paying for, just hoping to end soon.

When this happens, the best solution is to merge all debts into one, with the interest rate under control. The loan, in this case, can help balance the accounts and have greater control over the budget by pooling all debts in one installment.

2. Use credit card / overdraft to supplement income

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The credit card is used as a supplementary income for 20% of users, according to a survey of SPC Brazil. The overdraft is also commonly used to make the dreamed off at the end of the month.

What is largely overlooked by most people is that credit card and overdraft are a form of monthly pre-approved and renewed loan limit. Both are treated more naturally and acceptably compared to the personal loan. And that is a big mistake! Interest charged on credit card and overdraft amounts to 300% per year. By comparison, for example, Mutual’s average interest rate is 79% per year, which is ⅓ cheaper.

3. You need to go to the bank to get a loan.

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This is a major myth that has been crumbling in recent years as new financial services models such as those offered by fintechs advance. At Mutual, for example, the process of applying for a loan is becoming simpler and more affordable. Today, it is possible to simulate and contract a loan in a matter of minutes on your mobile phone without leaving your home.

4. I am not negative and yet I cannot get a loan

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The negativity of the name is not an obstacle when hiring a loan, not the only issue to be addressed in time to offer credit. The interest rate charged is based on the risk of this credit being paid or not.

Not having a financial history (other loans, credit card, or payables) in your name makes analysis difficult. Without it, companies cannot identify your borrower profile. It is therefore important to keep a good track record for the market to identify you as a good payer.