Loan to pay off balloon payment for car

smitchy73

Have a VW car on their Solutions plan, which incurs a balloon payment which will be due in about 6 months, and i'm starting to look at a loan to pay off the balloon payment, never had this type of car finance package before so not too sure what to expect and what will be available when it's 'that' time? Any help greatfully accepted.:D

SeanG79

You can either look to take out an unsecured personal loan, or there is the option of using a vehicle finance lender, which will secure the finance against the car in exactly the same way as VWFS will have done. Which option you choose should depend on what rates you are able to obtain based on your credit profile...

opinions4u

What rate are you paying on the existing finance?

Would it be possible to get a loan cheaper than that now instead of in six months?

jaydensrara

I have a car with vw on the same arrangement as you.
I have 4 months remaining and our finances changed,I rang vw and explained that I was worried about the balloon payment,the divided the amount over my remaining monthly payments so I wouldnt have to pay it in one lump sum

smitchy73

opinions4u wrote: »

What rate are you paying on the existing finance?

Would it be possible to get a loan cheaper than that now instead of in six months?

Thanks, i'm on 7.9% apr for the Solutions plan, i've looked at a couple of soft search loans, and they came back with about 13% APR on them. Doubt it would be cheaper in 6 months, but I also don't know what happens if I can't source the funds cheaper, I don't know if VW let you pay it up to them, I've read on their FAQ's that something can be arranged but it doesn't say what, the other side of it is, I do want to get another car, of another make, so not sure where I'll go from here!

SeanG79

Depending on the value of the car, you could part ex the vehicle for a new 1 and start a whole new agreement using any equity towards the deposit, rather than start a new agreement for the balloon portion. The obvious issue would be if there is negative equity in the vehicle. This could be carried over to the new vehicle if you chose but will result in the same issue with the next vehicle some years down the line. Have you had the car valued?

For refinance or financing of a balloon, an APR of approx 13% is going to be around what you would pay through vehicle refinance, lenders tend to assign a premium to refinance deals.

R_P_W

What was your plan when you took out the finance? Was it to make the payment and buy the car outright? Is it not something that you can save for or partly towards over the next 6 months?

smitchy73

R_P_W wrote: »

What was your plan when you took out the finance? Was it to make the payment and buy the car outright? Is it not something that you can save for or partly towards over the next 6 months?

The original plan was to use the car to change for another one and continue on, but I don't like the replacement cars, ie the new Golf, and can't justify paying the price for a polo or going right down to the new Up!, so have an eye on something else.

smitchy73

SeanG79 wrote: »

Depending on the value of the car, you could part ex the vehicle for a new 1 and start a whole new agreement using any equity towards the deposit, rather than start a new agreement for the balloon portion. The obvious issue would be if there is negative equity in the vehicle. This could be carried over to the new vehicle if you chose but will result in the same issue with the next vehicle some years down the line. Have you had the car valued?

For refinance or financing of a balloon, an APR of approx 13% is going to be around what you would pay through vehicle refinance, lenders tend to assign a premium to refinance deals.

I had a couple of prices a month or so but not with a VW dealer was with other dealers and their offers were pitiful to say the least, I come to expect this nowadays with cars though.
The loan I looked at was also £160 a month less than my current car payment, so this would allow me to either to reduce the term, or make extra payments to reduce the balance.

SeanG79

The loan I looked at was also £160 a month less than my current car payment

The lower payments doesn't much (interest rate could be and is higher), because you will be funding a smaller amount. you have also being paying interest on the fixed some of your balloon at 7.9%APR over the duration of the agreement, when you refinance you are effectively going to be paying interest in that money again.

Essentially what you choose to do now should depend on what you are hoping to achieve at the end of the day, ie. keep the car, change the car, etc. You must remember, you are not tied to VW, and can go to any dealership and you don't have to sell the car to a dealer if you feel you can get more for the car privately as long as the current agreement is settled.

smitchy73

SeanG79 wrote: »

The lower payments doesn't much (interest rate could be and is higher), because you will be funding a smaller amount. you have also being paying interest on the fixed some of your balloon at 7.9%APR over the duration of the agreement, when you refinance you are effectively going to be paying interest in that money again.

Essentially what you choose to do now should depend on what you are hoping to achieve at the end of the day, ie. keep the car, change the car, etc. You must remember, you are not tied to VW, and can go to any dealership and you don't have to sell the car to a dealer if you feel you can get more for the car privately as long as the current agreement is settled.

Yeah I know this is the worst bit of it all, so guess i'll just have to wait another couple of months and see where i'm at in regards to trade in prices for another car, which is what I want to do ( if I know!!)