Balloon Car Loan Calculator. Lower Repayments, Full Picture
A balloon, also called a residual, is a lump sum you owe at the end of the loan. It lowers the monthly repayment, but you pay interest on it for the whole term. Use the calculator below to see both sides before you choose.
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How does a balloon payment on a car loan work?
A balloon payment is a lump sum left owing at the end of a car loan. Because it is not paid down during the term, your monthly repayments are lower, but you pay interest on it the whole way through and must pay, refinance or trade out of it at the end.
- The balloon is set at the start, as a dollar amount or a percentage of the loan
- Lower monthly repayments, but more total interest than the same loan without a balloon
- The full balloon is due when the term ends
- At the end you can pay it, refinance it, or sell or trade in the car
- The maximum balloon depends on the lender, the vehicle and the term
- We do not charge an upfront assessment fee. Lender fees may apply
Balloon car loan calculator
Put in the amount, an example rate, the term and the balloon. See the monthly repayment with and without the balloon, and the lump sum still owing at the end.
An example only, not an offer. Type in a rate from a quote you have.
Lenders set their own maximum balloon. It depends on the lender, the vehicle and the term.
On these numbers the balloon lowers the monthly repayment by $163, and adds about $2,198 in interest over 5 years. You still owe $12,000 at the end.
The rate in the box is an example input. This figure is an illustration only, chosen to show how the calculation works. It is not a rate offered or available to you. Your rate depends on the lender, the vehicle, the loan amount and term, and the lender's assessment of your circumstances. Repayments shown here leave out fees and charges, so they are not a comparison rate.
WARNING: Any comparison rate provided is true only for the example given and may not include all fees and charges. Different terms, fees or loan amounts might result in a different comparison rate. Approval is subject to lender credit criteria. How comparison rates work
Want to know what balloon a lender on our panel would allow for your car?
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Lower Monthly Repayments
Leave part of the loan to the end and the regular repayment drops. You still owe that part when the term finishes.
Business Use
If the car is used for business, a chattel mortgage with a balloon may suit. Ask your accountant how the tax treatment applies to you.
Options at the End
Pay the balloon, refinance it, or sell or trade in the car. Each option has its own cost, so plan for it early.
New & Used Vehicles
Balloon structures can be available on new cars, used cars, utes and commercial vehicles, depending on the lender.
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We compare eligible balloon options from our panel and explain how each one would work for you.
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We do not charge an upfront assessment fee. Lender fees may apply, and we may receive commission from a lender if your loan settles.
Understanding Balloon Payment Car Finance
Balloon payment car loans are common in Australia, particularly for business owners using chattel mortgages. Instead of paying off the whole loan evenly over the term, you leave a portion, the balloon or residual, to a single payment at the end.
For example, on a $40,000 loan over 5 years with a 30% balloon, $12,000 is still owing at the end. Your regular repayments pay down the other $28,000, plus interest on the full balance, so they are lower than the same loan with no balloon but higher than a plain $28,000 loan. Try your own numbers in the calculator above.
How the balloon amount is set
When you apply, the lender usually estimates what the car may be worth at the end of the term. That estimate is the residual value, and it sets the ceiling on the balloon. The make, model, age, kilometres and the length of the loan all feed into it, and each lender uses its own limits.
During the term your repayments cover the interest on the whole loan and pay down the part of the principal that is not left as the balloon. That keeps the monthly figure lower, and it is also why the interest cost is higher than a loan with no balloon.
Balloon loan pros and cons
What a balloon can do for you
- Lower regular repayments, which can ease cash flow
- A newer car may fit the monthly budget
- If you like to change cars every few years, the trade in value may cover the balloon
What to weigh up
- A large lump sum falls due at the end of the term
- You pay interest on the balloon for the whole term, so total interest is higher
- If the car is worth less than the balloon, you owe the difference
- Always compare the comparison rate, not only the advertised rate. Comparison rates may vary, so check with the lender
Who a balloon may suit
A balloon can suit a business that wants structured repayments, someone who plans to sell or trade in before the balloon is due, or a borrower who expects a lump sum by the end of the term. It may be a poor fit if you want to own the car outright with no final payment, or you are unsure what your finances will look like at the end.
Some lenders on our panel offer a balloon to borrowers with a past credit issue, though the balloon allowed may be smaller and the rate higher. Approval depends on the lender's assessment.
Plan for the end of the term
The balloon does not go away. Before you sign, work out how you would pay it: savings, refinancing, or selling or trading in the car. If you plan to refinance, the new loan will depend on the lender's assessment at that time.
Cars lose value, so check that the balloon is realistic against what the car is likely to be worth when the term ends. A smaller balloon means higher repayments now, but less risk of owing more than the car is worth later.
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Frequently asked questions.
What is a balloon payment on a car loan?
A balloon payment, also called a residual, is a lump sum due at the end of your car loan term. Because that amount is not paid down during the loan, your regular repayments are lower. You still pay interest on it for the whole term.
How do I calculate a balloon payment?
If the balloon is a percentage, multiply the loan amount by it. A 30 per cent balloon on a $40,000 loan is $12,000. The regular repayment then pays down the other $28,000 plus interest on the full balance. Our calculator above does the sum for any amount, example rate, term and balloon.
Does a balloon payment reduce the interest I pay?
No, it usually increases it. The balloon stays owing for the whole term, so you pay interest on it every month. The calculator shows the extra interest next to the lower repayment, so you can weigh the two.
What happens when the balloon payment is due?
You can pay the lump sum outright, refinance the balloon into a new loan, or sell or trade in the vehicle and use the proceeds. If the car is worth less than the balloon when the term ends, you need to cover the difference.
How big can a balloon payment be?
It depends on the lender, the vehicle, its age at the end of the term and the length of the loan. Lenders set their own limits, so we check what each lender on our panel would allow for your car.
Are balloon payments a good idea?
They can suit you if you want lower regular repayments, plan to sell or trade in before the balloon is due, or use the vehicle for business. They cost more interest overall, and you need a plan for the lump sum at the end.
Can I get a balloon car loan with bad credit?
It can be harder, but some lenders on our panel may consider it. Expect a lower balloon limit and possibly a higher rate. Approval, rate and amount depend on the lender's assessment and responsible lending requirements.
Do I pay interest on the balloon payment?
Yes. Interest is charged on the whole balance, including the balloon, for the full term. That is why total interest is usually higher than the same loan without a balloon, even at the same rate.
Can I make extra payments on a balloon car loan?
Many lenders allow additional repayments, which can reduce what you owe at the end. Check with your lender about any early repayment fees.
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Simple Loans is a finance comparison tool. Holder of Australian Credit Licence No. 509582. All applications are subject to lender approval. Terms, conditions, fees and charges apply. This information is general in nature.