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In MB, what should I know about balloon loans for car loans?
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Car Loan Glossary • mb

In MB, what should I know about balloon loans for car loans?

In Manitoba, a car loan with a balloon payment means your monthly installments are significantly lower throughout the loan term, but a substantial lump sum payment, the 'balloon,' is due at the very end. This structure can make a higher-value vehicle seem more affordable on a monthly basis, appealing to consumers seeking immediate cash flow relief or those expecting a future windfall. However, it introduces considerable financial risks that require careful consideration under Canadian consumer protection principles.

The primary concern is refinancing risk: as we approach 2025, interest rates could be higher than when you originated the loan, making it more expensive to refinance that large final payment. There's also the market value risk, where the vehicle's actual resale value at the end of the term might be less than your balloon payment, potentially leaving you with negative equity if you plan to sell or trade it in. Consumers must ensure they have the funds saved or guaranteed financing secured to cover that final payment, as defaulting could lead to repossession and severe credit implications. Always understand the total cost of borrowing, including potential refinancing costs, and have a clear exit strategy before committing to a balloon loan in Manitoba.

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