Key highlights
- A balloon pushes part of the loan to a final lump sum
- Lower repayments free up cash for fuel and maintenance
- Suits charter and tour work with variable income
- A balloon means more total interest over the loan
- Have an exit ready — trade-in, sale or refinance
Balloon payments are a common feature of coach finance. They reduce your monthly outgoings by pushing part of the loan to a final lump sum. Used well, they help cash flow, but they need planning.
How does a balloon payment work?
Instead of repaying the full amount across the term, you leave a set percentage as a balloon due at the end. Your regular repayments cover the rest, so they are lower. At term's end you pay the balloon, refinance it, or sell or trade the coach to clear it.
Why choose a balloon on coach finance?
Lower repayments free up cash for fuel, maintenance and quieter seasons, which suits charter and tour work with variable income. The size of the balloon is usually flexible, giving you room to tailor repayments to your budget, subject to lender criteria.
What are the downsides of a balloon?
A balloon means more interest over the life of the loan and a lump sum to plan for. Have an exit ready, whether that is trade-in, sale or refinance. For any tax treatment of balloon structures, check with your accountant or registered tax adviser.
Wondering if a balloon suits your coach? Simon at Overdrive can model the options in an obligation-free quote. The soft check involved will not affect your credit score.
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