Quote:
Originally Posted by Righty
Optional Step: Change the finance of your BRZ into one with a balloon payment. This will reduce your monthly costs significantly.
|
You should pay your "balloon" up front if you want to keep monthly payments down. A balloon payment is just a way to make your effective interest rate much higher then what they advise.
For example, take a $34,000, 5 year loan with $7,000 balloon at 10%. You end up paying $515 a month, and pay almost $13,000 in interest (33% of the value of the loan on top)
If you paid the balloon up front, meaning a $27,000 over 5 years at 10%, you pay $570 a month, but only $7400 in interest (just over half as much).
And that's why balloon payments are one of the biggest loan scams going around.