Balloon Payment Loan Calculator
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Ballon cost value (AKA) BCV or Ballon Payment is a common term, you may listen form bankers in financing discussions. It is a lump sum payment due at the end of your loan terms. You may come across that term when purchasing high-value items such as cars, houses, property or other high-value assets. BCV calculator for cars is a tool that allows you to calculate the monthly payment and Ballon Cost Value with just one click. Just, fill out the simple input information and get the exact amount of your monthly instalment and the total amount of the final instalment payment.
The balloon cost payment calculator reduces your monthly instalment cost by a fraction and adds in the final instalment. BCV calculator enables potential buyers to assess their financial status and give an idea of the monthly liability and final liability at the end of the car loan term. This article enables you how to use the BCV calculator, the mathematics behind, it, the importance of the BCV calculation, and common questions about the ballon cost value.
Math in BCV calculator For Car
A balloon payment is a larger total payment left at the end of the loan terms after regular small instalments.
Having said that, Balloon payments let pledgers make smaller payments throughout the loan’s term but require a substantial final payment. The above calculator gives you an idea about what will be your monthly payment and the final balloon payment in the final instalment.
Inputs Required in BCV Calculator
Loan Amount (P): Principal amount of the loan that you are asking for to finance your car purchase
Interest Rate (r): The annual interest charged by the bank usually in percentage amount of the principal loan amount.
Loan Term (n): It is the tenure of the loan term which can be in months or years. But installments to be only paid in months.
Balloon Payment (% of Loan): Balloon payment % that you want to pay as a lump sum in the last instalment.
Down Payment (D): It is the amount you are willing to pay upfront for the loan. It is usually deducted from the loan amount.
BCV Calculator for Car Monthly Payment Formula
For a fixed-rate loan with a balloon payment, the formula to calculate the monthly payment is derived from the standard amortization formula, modified to account for the balloon payment:
Where:
- M is the monthly payment,
- P is the principal (loan amount – down payment),
- r is the monthly interest rate (annual interest rate / 12),
- n is the loan term in months.
Formula for Balloon Payment
The balloon payment is a percentage of the loan amount that is deferred to the end of the term:
B=P×Balloon PercentageB = P \times \text{Balloon Percentage}B=P×Balloon Percentage
Where:
B is the balloon payment,
P is the original loan amount.
By plugging the values into the BCV Calculator, users can easily see how much they will need to pay monthly, and how much the balloon payment will be at the end of the loan term.
Use Case of BCV Calculator
You can use the BCV calculator in real life to calculate the balloon payment in automobile financing, real estate, or equipment leasing.
Let’s say you are planning to buy a car and looking for a financing option that has room for a balloon payment option. You can easily calculate the monthly instalment and the complete final payment of the loan term. It calculates and reduces the amount of monthly payments and sums it in the final payment.
For example, a car worth $55,949 and a financing company are offering you the complete amount with a 3% fixed interest rate annually for the term of 5 years.
On zero down payment, you have to pay $1005.33 each month as an instalment payment. The final paid amount in term would be $ 60,319.82 including the interest rate.
And,
Luckily, you are getting an option to pay a 25% balloon payment at the end of the loan. You will pay $754.00 every month and the lump sum balloon payment of $13987.25 at the end of the loan term. Whereas it also reduces the final amount to $59227.11 saving you a few more bucks.
The reduction in the final amount is due to the interest rate being lower after deducting the amount of balloon payment from the loan amount.
For example, the amount after deducting the 25% balloon payment from the loan amount of $55,949 would be $ 41,961.75. You will pay the interest on this amount which in turn lowers the interest amount.
Why It’s Important to Calculate Balloon Payments
It would be wise to use the BCV calculator for calculating the balloon payment to make necessary repayment arrangements and decisions. It gives an idea about how much would you pay in the end to make necessary arrangements and saving plans to pay off your loans.
With precise calculations, you are going to make informed decisions. It enables you to understand whether the loan terms are affordable to you or not.
It enables you to make future decisions. Suppose you already are paying monthly instalments for a house, and the balloon payment deadline is approaching. It gives an idea about your car purchase decision whether it’s in your capacity or not.
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