Mind that balloon

Balloon payments are appealing in that you get the car for a smaller “affordable” monthly payment, BUT a big lump sum awaits you after six or seven years. On a R350 000 car over five years, a 20% balloon knocks around R870 off your instalment. But here's the catch. You pay more in the end, roughly R18 000 more, and you're left with a R70 000 lump sum to find. And that lump sum feels abstract, until it isn't. So if you take a balloon, treat it like a savings target from day one. Put money aside every month towards it. And if you're worried you won't be able to pay it, phone your bank early, don't go quiet. Silence is the one thing that limits what they can do to help.