August 19, 2025 • 11 mins
Relebogile Mabotja speaks to Sumarie Greybe, Co-Founder of Naked Insurance on balloon payments for financing the purchase of a car. They touch on the conditions most suitable for one to take a ballon payment for their car .
702 Afternoons with Relebogile Mabotja is broadcast live on Johannesburg based talk radio station 702 every weekday afternoon. Relebogile brings a lighter touch to some of the issues of the day as well as a mix of lifestyle topics and a peak into the worlds of entertainment and leisure.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Seven two the Car Feature Car Feature Time on seven
o two afternoons and today we're talking about balloon payments.
Speaker 2 (00:10):
Is this a debt trap or is it something that
can help you out because you really need that car?
Speaker 1 (00:15):
Oh double one double A three oh seven oh two
In the onsap line O seven to two seven oh
two on seven o two, we are joined by su
Marie Graber, co founder at Naked Insurance SUMMRI.
Speaker 2 (00:26):
Welcome to the show. Thank you so much for joining us.
Speaker 3 (00:29):
That's absolutely graty to be here and to talk about
balloon payments.
Speaker 1 (00:33):
Yes, and we we need we need the lowdown because
half of the time when balloon payments become a topic
of conversation, it's because a person kind of forgot and
then it catches them by surprise. And the way I
look at balloon payments is you're paying the deposits.
Speaker 3 (00:51):
But at the end, I actually fully agree with you,
and I think the question you always have to ask,
if you didn't have the deposit available when you actually
started the carlan, what is going to change to make
sure you have that deposit available at the end of
the carlone? Yeah, And I think that's the question you
(01:14):
have to ask before you decide to go for that
balloon payment and whether it is actually something that is
suitable for you in your circumstances.
Speaker 1 (01:23):
So let's then get to the basics of what balloon
payments are and why they even came to be a thing,
and like when was it a thing to say, actually,
let's add this massive payment right at the end. And
I'm assuming because when the economy started getting really bad
that we had to create different ways for people to
(01:46):
be able to afford things.
Speaker 3 (01:49):
Yeah, that is exactly right. We have seen car sales
actually reducing over the last couple of years, and I
think finance houses had to get a bit more inventive
on how to make a car more affordable now. And
I also think generally, people, especially South Africans, very often
(02:12):
like to buy very flashy cars and maybe cars that
are outside of their real affordability range. And therefore a
balloon payment becomes very appealing because you can afford a
more expensive car than you actually should be buying.
Speaker 1 (02:29):
So when then people find themselves in this situation where
they're having to decide if they want a balloon payment
or not, what are the questions you think they need
to ask themselves and are you touched on the one
to say, if you can't afford the deposit, now, let's
use a round figure and say fifty thousand rand, what
(02:49):
would change for you to now afford it after seventy
two months, which is what six years?
Speaker 3 (02:55):
Yeah? Yeah, So I think the big question you have
to ask yourself are you in a situation where your
income and your ability to save is going to change
dramatically over that sixty months or seventy two month period.
And I think for me, if the answer to that
is no, it becomes quite doubtful whether you should go
for it. I mean, there's other things that come into
(03:18):
into play here as well. For example, if you are
if you're seeing the vehicle in the name of your business,
and there's facts at advantages and things that you can
actually all set against it to help you say for
that balloon payment, that might make you know that might
(03:39):
make sense. I think one of the big other risks
is if you have to exit the loan early and
that balloon and enforced you quicker than you think it
will be, that's a risk. But if you are a
hundred percent sure that you're going to stay stick with
your loan for the whole term. I think it's also
a little bit more palatable to look at that loon
(04:00):
payment and I think the last one, and I think
for me, this is the least convincing one. But maybe
there is something to that where I've heard people speak
about the fact that you know that would rather buy
the slightly more expensive new car where they are on
a service plan and they can budget much better, and
(04:21):
then save that extra money for the balloon payment, then
buying the cheaper second hand vehicle where they actually don't
know what the maintenance cost and it's going to be,
and then they're up the balloon payment to rather go
for the more known factor of a new vehicle and
what those costs will be.
Speaker 2 (04:38):
All Right, we need to take a break.
Speaker 1 (04:39):
When we come back, we continue talking about balloon payments.
Get your questions in audible one w A three oh
seven oh two on the What's Up line seven two
seven oh two one seven two seven two the car
feature nine minutes to three o'clock. We continue with the
car feature on seven oh two afternoons and we'll talk
about balloon payments together. A su Mari Grayber, co founder
(05:03):
at Naked Insurance, Get your Questions in audible one double
A three or seven oh two in the WhatsApp line
oh seven two seven oh two one seven two summri.
Speaker 2 (05:11):
Just in terms of the balloon payment, I.
Speaker 1 (05:15):
See that there are some people who when it gets
time to reach the balloon payment and maybe they've forgot
about it, then they offered refinancing.
Speaker 2 (05:23):
What does that mean?
Speaker 3 (05:26):
So refinancing can be availabile. If you get to the
end of the term and say you have to make
a two hundred thousand round balloon payment, which is very
possible on an expensive vehicle, you can then if you
your credit writing is good enough, you can actually apply
then at the bank to give you a loan for
that two hundred thousand, and that then means that you
(05:49):
will pay that up off over time. But then of
course you are going to be incurring additional interest, additional
monthly payments that you will continue to make for an
extent period of time. But that is what it means
with actually refinancing that balloon payment.
Speaker 1 (06:05):
Didn't the balloon payment already have interest on it, meaning
that you're refinancing, you're doing interest on top of.
Speaker 3 (06:12):
Interest, and so the balloon payment itself. So how the
interest normally work is that when your monthly payments are
worked out, they take the full loone amount that I've
given you. So so, for example, you have bought a
vehicle that is worth one million rand, and you took
a twenty percent balloon payment. They're not going to work
(06:33):
out your monthly interest payment on your car loan repayment
on eight hundred thousand. That going to work it out
on a million. So you pay that interest on that
two hundred thousand for the duration of your loan that
you had for your car. But when you get to
the end of it and you want to refinance, they
(06:56):
are re issuing a loan to you for two hundred
thousand for a new period of time, and you will
then incur additional interest for that extended period of time
because the interest that you've said only relates to your
original loan terms on the ball All.
Speaker 1 (07:12):
Right, let's go to some of the listeners questions on
audible ONEA A three or seven oh two in the
WhatsApp line oh seven two, seven oh two and seven
oh two.
Speaker 2 (07:20):
We've got a voice note relive earlier.
Speaker 4 (07:23):
Honestly, that balloon payment thing is really a trap, because
you honestly does honestly means that now you can't afford
the car if you are in a balloon payment kind
of set up. So for me, if you can't afford it,
then you get into that deposity balloon payments kind of thing.
Speaker 1 (07:42):
Thanks a summary if if if a person gets to
the end and it's time to pay up the balloon
payment but they can't, what are those risks? What happens
if you can't now pay this balloon payment.
Speaker 3 (07:58):
So there's a couple of options that are open to you.
Of course, you can at that point, you can sell
the car. The issue with that is that the you know,
you don't own the car out right yet. But the
biggest thing that normally happens is, like we said, refinancing.
(08:19):
And the worst thing that can happen to you at
that point in time is that you basically have to
give the car back because under the National Credit Act,
the bank, if you can't pay the balloon payment and
you can't find the money to pay the balloon payment,
you actually they can come and repossess your vehicles as
(08:41):
a plateral for that balloon payment.
Speaker 1 (08:45):
So even though your car might have a value at
that time of one hundred thousand rand and you owe fifty,
they can take the car to recover that fifty k.
Speaker 3 (08:55):
Yes, that can that can make that's the car.
Speaker 1 (08:58):
And there's no part of it that's going to say,
here's your change of fifty thousand rand.
Speaker 3 (09:04):
If there is, of course, in order to come and
repossess the vehicle. To get that vehicle sold, the bank
will incur charges. So it's very like if there is
any money left over, yes you might get some of
it back, but it's very unlikely given all the cars,
that the bank will have to encur to actually recoup
(09:25):
their money. And normally if it work the same way
as you, if your default on your past repayments, the
bank will sell that house normally only trying to get
back whatever their outstanding amount is. So even if your
car is worth one hundred thousand, that'll be very happy
to take fifty if that's what they owed. So if
(09:45):
they can just settle their debt funder no obligation to
sell it for a hundred if it's worth one hundred.
Speaker 1 (09:52):
Our final thoughts summary on her balloon payments that all
of us listeners need to be aware of.
Speaker 3 (10:01):
I think a good tip that I would give to
people if you really want to go for that balloon payment,
there's a way to do it that's called where you
agree with your bank upfront a guaranteed future value for
that vehicle, and that you set your balloon payment for that.
So if you get to the end of your loan
(10:24):
and you and you don't have the balloon payment, what
you can do if you can then just give the
car back to the bank and there will be no
shortfall even if the value of your car is then
less than what you owe the bank, because they agreed
upfront a value of that vehicle. So it does manage
that financial recity might have of a shortfall that you
(10:44):
still have to pay out if a vehicle has to
appreciate it more than what the balloon payment is worth.
So that guaranteed future value is what I would have
a look at if I really wanted to do a
balloon payment.
Speaker 1 (10:57):
Thank you so so much, Assumery for chatting to us
on today's cough feature.
Seven two the Car Feature Car Feature Time on seven
o two afternoons and today we're talking about balloon payments.
Speaker 2 (00:10):
Is this a debt trap or is it something that
can help you out because you really need that car?
Speaker 1 (00:15):
Oh double one double A three oh seven oh two
In the onsap line O seven to two seven oh
two on seven o two, we are joined by su
Marie Graber, co founder at Naked Insurance SUMMRI.
Speaker 2 (00:26):
Welcome to the show. Thank you so much for joining us.
Speaker 3 (00:29):
That's absolutely graty to be here and to talk about
balloon payments.
Speaker 1 (00:33):
Yes, and we we need we need the lowdown because
half of the time when balloon payments become a topic
of conversation, it's because a person kind of forgot and
then it catches them by surprise. And the way I
look at balloon payments is you're paying the deposits.
Speaker 3 (00:51):
But at the end, I actually fully agree with you,
and I think the question you always have to ask,
if you didn't have the deposit available when you actually
started the carlan, what is going to change to make
sure you have that deposit available at the end of
the carlone? Yeah, And I think that's the question you
(01:14):
have to ask before you decide to go for that
balloon payment and whether it is actually something that is
suitable for you in your circumstances.
Speaker 1 (01:23):
So let's then get to the basics of what balloon
payments are and why they even came to be a thing,
and like when was it a thing to say, actually,
let's add this massive payment right at the end. And
I'm assuming because when the economy started getting really bad
that we had to create different ways for people to
(01:46):
be able to afford things.
Speaker 3 (01:49):
Yeah, that is exactly right. We have seen car sales
actually reducing over the last couple of years, and I
think finance houses had to get a bit more inventive
on how to make a car more affordable now. And
I also think generally, people, especially South Africans, very often
(02:12):
like to buy very flashy cars and maybe cars that
are outside of their real affordability range. And therefore a
balloon payment becomes very appealing because you can afford a
more expensive car than you actually should be buying.
Speaker 1 (02:29):
So when then people find themselves in this situation where
they're having to decide if they want a balloon payment
or not, what are the questions you think they need
to ask themselves and are you touched on the one
to say, if you can't afford the deposit, now, let's
use a round figure and say fifty thousand rand, what
(02:49):
would change for you to now afford it after seventy
two months, which is what six years?
Speaker 3 (02:55):
Yeah? Yeah, So I think the big question you have
to ask yourself are you in a situation where your
income and your ability to save is going to change
dramatically over that sixty months or seventy two month period.
And I think for me, if the answer to that
is no, it becomes quite doubtful whether you should go
for it. I mean, there's other things that come into
(03:18):
into play here as well. For example, if you are
if you're seeing the vehicle in the name of your business,
and there's facts at advantages and things that you can
actually all set against it to help you say for
that balloon payment, that might make you know that might
(03:39):
make sense. I think one of the big other risks
is if you have to exit the loan early and
that balloon and enforced you quicker than you think it
will be, that's a risk. But if you are a
hundred percent sure that you're going to stay stick with
your loan for the whole term. I think it's also
a little bit more palatable to look at that loon
(04:00):
payment and I think the last one, and I think
for me, this is the least convincing one. But maybe
there is something to that where I've heard people speak
about the fact that you know that would rather buy
the slightly more expensive new car where they are on
a service plan and they can budget much better, and
(04:21):
then save that extra money for the balloon payment, then
buying the cheaper second hand vehicle where they actually don't
know what the maintenance cost and it's going to be,
and then they're up the balloon payment to rather go
for the more known factor of a new vehicle and
what those costs will be.
Speaker 2 (04:38):
All Right, we need to take a break.
Speaker 1 (04:39):
When we come back, we continue talking about balloon payments.
Get your questions in audible one w A three oh
seven oh two on the What's Up line seven two
seven oh two one seven two seven two the car
feature nine minutes to three o'clock. We continue with the
car feature on seven oh two afternoons and we'll talk
about balloon payments together. A su Mari Grayber, co founder
(05:03):
at Naked Insurance, Get your Questions in audible one double
A three or seven oh two in the WhatsApp line
oh seven two seven oh two one seven two summri.
Speaker 2 (05:11):
Just in terms of the balloon payment, I.
Speaker 1 (05:15):
See that there are some people who when it gets
time to reach the balloon payment and maybe they've forgot
about it, then they offered refinancing.
Speaker 2 (05:23):
What does that mean?
Speaker 3 (05:26):
So refinancing can be availabile. If you get to the
end of the term and say you have to make
a two hundred thousand round balloon payment, which is very
possible on an expensive vehicle, you can then if you
your credit writing is good enough, you can actually apply
then at the bank to give you a loan for
that two hundred thousand, and that then means that you
(05:49):
will pay that up off over time. But then of
course you are going to be incurring additional interest, additional
monthly payments that you will continue to make for an
extent period of time. But that is what it means
with actually refinancing that balloon payment.
Speaker 1 (06:05):
Didn't the balloon payment already have interest on it, meaning
that you're refinancing, you're doing interest on top of.
Speaker 3 (06:12):
Interest, and so the balloon payment itself. So how the
interest normally work is that when your monthly payments are
worked out, they take the full loone amount that I've
given you. So so, for example, you have bought a
vehicle that is worth one million rand, and you took
a twenty percent balloon payment. They're not going to work
(06:33):
out your monthly interest payment on your car loan repayment
on eight hundred thousand. That going to work it out
on a million. So you pay that interest on that
two hundred thousand for the duration of your loan that
you had for your car. But when you get to
the end of it and you want to refinance, they
(06:56):
are re issuing a loan to you for two hundred
thousand for a new period of time, and you will
then incur additional interest for that extended period of time
because the interest that you've said only relates to your
original loan terms on the ball All.
Speaker 1 (07:12):
Right, let's go to some of the listeners questions on
audible ONEA A three or seven oh two in the
WhatsApp line oh seven two, seven oh two and seven
oh two.
Speaker 2 (07:20):
We've got a voice note relive earlier.
Speaker 4 (07:23):
Honestly, that balloon payment thing is really a trap, because
you honestly does honestly means that now you can't afford
the car if you are in a balloon payment kind
of set up. So for me, if you can't afford it,
then you get into that deposity balloon payments kind of thing.
Speaker 1 (07:42):
Thanks a summary if if if a person gets to
the end and it's time to pay up the balloon
payment but they can't, what are those risks? What happens
if you can't now pay this balloon payment.
Speaker 3 (07:58):
So there's a couple of options that are open to you.
Of course, you can at that point, you can sell
the car. The issue with that is that the you know,
you don't own the car out right yet. But the
biggest thing that normally happens is, like we said, refinancing.
(08:19):
And the worst thing that can happen to you at
that point in time is that you basically have to
give the car back because under the National Credit Act,
the bank, if you can't pay the balloon payment and
you can't find the money to pay the balloon payment,
you actually they can come and repossess your vehicles as
(08:41):
a plateral for that balloon payment.
Speaker 1 (08:45):
So even though your car might have a value at
that time of one hundred thousand rand and you owe fifty,
they can take the car to recover that fifty k.
Speaker 3 (08:55):
Yes, that can that can make that's the car.
Speaker 1 (08:58):
And there's no part of it that's going to say,
here's your change of fifty thousand rand.
Speaker 3 (09:04):
If there is, of course, in order to come and
repossess the vehicle. To get that vehicle sold, the bank
will incur charges. So it's very like if there is
any money left over, yes you might get some of
it back, but it's very unlikely given all the cars,
that the bank will have to encur to actually recoup
(09:25):
their money. And normally if it work the same way
as you, if your default on your past repayments, the
bank will sell that house normally only trying to get
back whatever their outstanding amount is. So even if your
car is worth one hundred thousand, that'll be very happy
to take fifty if that's what they owed. So if
(09:45):
they can just settle their debt funder no obligation to
sell it for a hundred if it's worth one hundred.
Speaker 1 (09:52):
Our final thoughts summary on her balloon payments that all
of us listeners need to be aware of.
Speaker 3 (10:01):
I think a good tip that I would give to
people if you really want to go for that balloon payment,
there's a way to do it that's called where you
agree with your bank upfront a guaranteed future value for
that vehicle, and that you set your balloon payment for that.
So if you get to the end of your loan
(10:24):
and you and you don't have the balloon payment, what
you can do if you can then just give the
car back to the bank and there will be no
shortfall even if the value of your car is then
less than what you owe the bank, because they agreed
upfront a value of that vehicle. So it does manage
that financial recity might have of a shortfall that you
(10:44):
still have to pay out if a vehicle has to
appreciate it more than what the balloon payment is worth.
So that guaranteed future value is what I would have
a look at if I really wanted to do a
balloon payment.
Speaker 1 (10:57):
Thank you so so much, Assumery for chatting to us
on today's cough feature.
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