Fincar March 15, 2024 No Comments

Many borrowers who take on a car loan will do whatever it takes to reduce their repayments. One way this is often achieved is through a balloon payment. Also known as a residual payment, it involves a lump sum payment at the end of the loan term, thus reducing your monthly repayment obligations through the course of the loan.

In a perfect world, paying this balloon payment would free you from your debt. Sometimes however, things can take an unexpected turn and we run into financial difficulty.

In this instance, what should you do if you can’t pay the balloon payment? Will you default on the loan, or is it possible to work yourself out of a precarious position?

End of Loan Refinancing

Fortunately there is a convenient solution that can come to your rescue in the event you cannot meet your obligations to pay the balloon payment. While there are other options you can pursue, end of loan refinancing is a path you may want to consider if you intend to keep the car in question. After all, facing the prospect of selling your car just to repay the balloon payment hardly seems like you’re walking away with what you paid for.

So what is end of loan refinancing? Effectively you renegotiate your existing car loan such that it is replaced by a new one. Whereas the balloon payment would have fallen due as one lump sum payment, refinancing your loan allows you to spread out payments across a longer period of time. If cash flow is a particular constraint, this flexibility may provide you some necessary breathing space.

Refinancing may also be undertaken at other times during a car loan. When this financial strategy is utilised during the middle of a loan, the aim is to renegotiate the interest rate or term of the contract. That is, a borrower will look to reduce their interest costs or tailor the length of the loan to suit their payment preferences.

It can be a daunting prospect knowing that your balloon payment is coming up and that you don’t have the money to pay it. Rather than backing yourself into a stressful position, putting your car at stake, or potentially damaging your credit history by missing the residual payment, end of loan refinancing can offer you a hassle free solution to reorganise your financial commitments.


The Fincar team is here to help you with all your financing needs. Contact us today to help arrange your next car or equipment loan.