What is a Balloon Payment? | The dangers of Payment Deferrals for Cars and Mortgages

This video is applicable to all of the mortgage or can loan payment deferrals.
🗨Timestamps🗨

00:00 What is a Balloon Payment?
00:30 How Payment Works
02:08 The Risk of Balloon Payment
02:44 Balloon Payment vs. Lease Payment
04:59 Upside-down Car Return
05:32 Rolling in the debt
06:35 Commercial Mortgage

Balloon Payment or as Chrysler Used to call it “Customer Choice Financing.” What is it and why it is an absolutely worst way to finance anything. Another way it is called is Bullet Repayment and that is because it can be crippling to your finances.

It doesn’t matter if you take a car loan or a mortgage (by the way in a lot of countries’ residential mortgages that structured in this way are illegal).

The basic idea is the same: you need something right now like a car to get to work. Because you can’t get to work without the car, right now you don’t have enough cash flow to make payments on a traditional loan for say 3 years. You also don’t want to because of ultimately high-interest costs or don’t qualify for those crazy 96 months loans.

Dealership says no problem. What we are going to do just for you is that we are going to half of the price of the car and finance it over 36 months. This will give you the low monthly payment you can afford now. What is happening with the other half? Well, you would have to pay all at once in 36 months. However, you will have your job and of course, you would be able to pay half of the car price in one lump sum.
This works the same way with mortgages, except their collateral is real estate that can potentially be an asset, while the car is 100% liability.

🗨 Car Buying Playlist: https://www.youtube.com/playlist?list=PLoQ9ilF2mrz2S5q56WJxuHeywuyBKw2Pl
🗨 Car Buying Guide: https://www.financialfreedom.guru/should-i-buy-a-car/car-purchase-options/

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Видео What is a Balloon Payment? | The dangers of Payment Deferrals for Cars and Mortgages канала FFG-Regular People Building Wealth