An installment agreement that includes a residual value or balloon payment may be advantageous in certain circumstances and certainly serves to lower the monthly installment on a vehicle. They may, however, turn out to be less than ideal in certain circumstances.
For example, if the terms had not been explained to you properly at the time of signing your agreement, you may be distraught to discover that you cannot take ownership of your vehicle before settling a large outstanding residual value upon arrival of your last installment. Usually, the entire residual value or balloon payment has to be settled at the end of your agreement, or the vehicle ownership reverts to the financing institution.
Alternatively, you may change your mind at some time during the repayment period and decide to keep the vehicle, but you cannot afford the large cash balloon payment. In both cases, you can refinance your settlement amount (including the residual or balloon payment) through Auto Refin.
Refinancing allows you to restructure your debt and pay off the outstanding balance without having to pay the balloon payment or residual in cash, all at once. You get to keep the vehicle and you can settle the outstanding balance on easy terms. Simply download the application form to apply for refinancing your residual amount and send it to us for consideration.
Here is an example of how you can benefit from a refinancing deal on a vehicle with a residual value: You may have bought a single cab 4×4 bakkie for R200,000 in 2008 at an 18% interest rate and with a 30% residual value. You would have to settle a balloon payment of R66,000 in cash at the time of your last installment, but if you are approved to refinance it over 36 months at 11% interest, you can settle the outstanding amount at only R2,500 per month.