Bike Loans Australia :: Articles

Balloon Payment Loans: 6 steps to make the loan profitable

Balloon Payment Loans: 6 steps to make the loan profitable

Balloon Payment Loans: 6 steps to make the loan profitable
Did you know that you can reduce the monthly payments on a loan to half of what they should be by using a balloon payment? Handled correctly, structuring your loan to include a Balloon Payment will increase your bottom line. Mishandled, a Balloon Payment can cause real headaches. Here are 6 steps to keep it smart.

What is a balloon payment?

You take out a loan for goods or equipment. Your monthly loan payment is half of what they should because the last payment of the loan is  a large portion of the total loan, called a balloon payment.

  • You want to buy goods or equipment and loan  finance the purchase. 
  • You are quoted a monthly loan repayment and it seems high to you. 
  • Business Plant & Equipment Finance
    Image for Business Plant & Equipment FinanceLooking for the best way to finance your business plant & equipment? Well, you need look no further! Simply submit our 2-minute business loan enquiry form ... and we'll help get you qualified for the best rate Plant & Equipment loan available from our national panel of independent business finance brokers. We also have access to the best rates & options for Business Cashflow finance. So, why not give us a go ... no charge, no obligation!
    You are then told the loan repayment can be halved and you can have a balloon payment at the end of the loan.
  • So you enter the loan agreement thinking you are getting what you want, at a very low monthly payment. 
  • Sadly, many  buy balloon loan payments like this and set themselves up for a financial nightmare at the end of the loan or lease.

Here is why.

The loan lease they have signed could be as follows. Value of loan $30,000, 36 months, interest and principle payments on $15,000 and one last payment to completion the loan of $15,000.

Assume that you have worked the goods very hard and they are about three quarters through their life span and have been significantly depreciated.  You check the market and you can buy your goods for $7,000 in the second hand market.

 You have to come up with $15,000 for the last loan payment.  Take the situation that you do not have the $15,000 to make the last loan payment.  You will be confronted by two options

Option One

What is a value of the goods?  $7,000.  You do not have the $15,000 so you take out a $15,000 loan to pay for goods of $7,000?

Option two

You sell the goods at $7,000 and take out a loan to pay the $8,000 off the loan Balloon payment.  Now you are paying for goods you do not own!

How do you avoid these traps?

If you knew someone who was in this situation how would you rate their ability as a business person.  It is amazing how many people get caught up in  having to pick option one or option two.

So how do you avoid getting caught?  It is quite easy.

Step One

Look at the goods that you want to buy.   Now take a same type of goods that were being sold three years ago.

The model may be superseded but try and find out what you would have paid for it then.   There is a value in keeping old catalogues.

Step Two

Look at the second hand market for that model of goods. Divide the goods into three categories.

  • Light use.
  • Medium use.
  • Heavy use

 How much is each category currently selling for today?

 Step Three

Work out what the value the goods have depreciated in the period. If it was sold for $10,000 and is now $5,000 it can be assumed  that it will lose its value by 50% in three years.

The numbers may change but the general % value should not.  It may be that the value rises in which case there would be a benefit to you.

 Step Four

Now look at the goods you want to buy today. Assume that the value of the goods in three years time would be based on past performances.

The price has now fallen in purchasing new goods to $7,000, you then estimate the selling price for them in three years to be  $3,500.

Step Five

In the loan lease agreement  you  pay $7000.   You have a balloon loan payment of $3,500.  Remember this is the final payment of the loan.

You have much lower loan monthly payment  as you are only paying monthly loan payments on the $3500.

At the end of three years you have paid off the $3,500 from your monthly loan repayments, you sell the goods, and pay out the  loan balloon last payment of $3,500

Step Six

You now repeat the process and purchase the latest goods by repeating the same process.

You are getting the goods at a lower loan monthly cost than your competitors and you are always maintaining your competitive edge because you are using the latest technology.

This article is a very high level explanation.  Be sure that you get the correct investment and taxation advice before proceeding.  A Mortgage Broker can introduce you to lenders who can arrange finance for you.

Published: Tuesday, 24th Aug 2021
Author: 150


Bike Loans Articles

Bike Loans vs. Personal Loans: Which One Should You Choose? Bike Loans vs. Personal Loans: Which One Should You Choose?
When it comes to buying a new motorcycle, financing is often the most suitable solution for most people. There are two main options available: bike loans and personal loans. It's important to understand the key differences between the two to help you make an informed decision. - read more
Effective Budgeting Strategies for Managing Motorcycle Loan Repayments Effective Budgeting Strategies for Managing Motorcycle Loan Repayments
There's nothing quite like the thrill of hitting the open road on your motorcycle. The freedom, the exhilaration, and the sense of adventure are unparalleled. For many Australians, motorcycling isn't just a mode of transport; it's a passion and a lifestyle choice. - read more
The Pros and Cons of Owning a Sport Motorbike as an Aussie Female Rider The Pros and Cons of Owning a Sport Motorbike as an Aussie Female Rider
When it comes to motorcycles, there are many different types to choose from. One type that has gained popularity among Australian female riders is the sport motorbike. In this article, we will explore what a sport motorbike is, why some female riders prefer them, and weigh the pros and cons of owning one. - read more
Pros and Cons of Buying a New Motorcycle vs a Used One in Australia Pros and Cons of Buying a New Motorcycle vs a Used One in Australia
If you’re considering purchasing a motorcycle in Australia, one of the critical decisions you'll face is whether to buy a new or used one. This decision can significantly impact your finances, so making an informed choice is paramount. - read more
Securing a Motorcycle Loan with Minimal Credit Impact: A Step-by-Step Guide Securing a Motorcycle Loan with Minimal Credit Impact: A Step-by-Step Guide
Welcome to the exhilarating world of motorcycle riding. Whether you're a seasoned rider or just getting started, there's something uniquely thrilling about hitting the open road on two wheels. - read more
Avoiding Common Pitfalls in Motorcycle Financing: What to Watch Out For Avoiding Common Pitfalls in Motorcycle Financing: What to Watch Out For
Motorcycle financing is a convenient way for enthusiasts to purchase their dream bikes without having to pay the full cost upfront. However, understanding the potential pitfalls and avoiding them is crucial to ensure a smooth and cost-effective financing experience. - read more
Navigating Aussie Weather: Motorcycle Maintenance for Every Season Navigating Aussie Weather: Motorcycle Maintenance for Every Season
The importance of motorcycle maintenance cannot be understated, especially when faced with the unique and shifting weather conditions that span our vast continent. From the scorching heat of the Outback to the wet and windy coastline, traversing Australia on two wheels requires your machine to be as adaptable as you are. - read more
5 Things to Consider Before Taking a Loan for Your Dream Motorcycle 5 Things to Consider Before Taking a Loan for Your Dream Motorcycle
The wind in your hair, the roar of the engine, and the freedom of the open road – there's nothing quite like the thrill of owning your dream motorcycle. For many enthusiasts, it's not just a mode of transportation; it's a lifelong ambition, a symbol of adventure and independence. But unless you've been saving for years, the prohibitive cost could make this dream seem out of reach. - read more

Finance News

Increasing Number of Qualified Financial Advisers Opt Out of Practice Increasing Number of Qualified Financial Advisers Opt Out of Practice
11 Jul 2025: Paige Estritori

Recent analysis from WealthData indicates a growing trend among financial advisers in Australia, where a significant portion of those who have successfully passed the financial adviser exam are opting not to practice. As of now, 5,096 individuals, representing 33.31% of active advisers, have chosen not to proceed into practice after passing the exam—up from 28.36% a year prior. - read more
Melbourne's Housing Market: A Prime Opportunity For Buyers Melbourne's Housing Market: A Prime Opportunity For Buyers
11 Jul 2025: Paige Estritori

The Reserve Bank of Australia (RBA) recently surprised many by maintaining the interest rate at 3.85%, against expectations of a cut. This decision is seen as a measure to continue moderating inflation, but it simultaneously delays potential spikes in the housing market, providing a favorable window for prospective homebuyers. In particular, Melbourne's current market presents significant value, offering a promising opportunity for those looking to enter the property market. - read more
Improving EOFY Planning: The Call for ATO Portal Access for Advisers Improving EOFY Planning: The Call for ATO Portal Access for Advisers
09 Jul 2025: Paige Estritori

In a recent discussion, James O'Reilly, Director and Financial Planner at Northeast Wealth, underscored the benefits that could come from granting financial advisers access to the Australian Taxation Office (ATO) portal. Speaking on The ifa Show, O'Reilly proposed that this access would significantly simplify the services financial advisers provide to clients, particularly at tax time and the end of the financial year (EOFY). - read more
RBA Holds Rates Steady, Shocking Markets and Shifting Economic Expectations RBA Holds Rates Steady, Shocking Markets and Shifting Economic Expectations
09 Jul 2025: Paige Estritori

The Reserve Bank of Australia (RBA) has decided to keep the official cash rate steady at 3.85%, taking many by surprise after expectations of a 25-basis-point cut had built up in financial circles. This unexpected move comes amid recent data indicating easing inflation and weaker than anticipated economic growth, conflicting with prior predictions of a cut. - read more

Start Here

START HERE.

Loan Amount:
Postcode:

Knowledgebase
Equity:
The amount of (or that portion of) an asset actually owned. Equity is the difference between the market value and the current amount of money still owing on the loan. This is also referred to as the owner’s interest.