What's your opinion on a Ballon Loan?

[nancbud]

We're trying to refinance our home and consolidate some bills, we have an offer at 7 1/2 - 8 1/2 % Fixed interest for $50,000.00 at $381.00 a month on a 10 year ballon. We're not sure about a ballon and don't think this is a good deal and we want our house paid of in 15 years. What do you think?

[Didwot]

IN the UK balloon loans are only used for financing consumer items like cars. The idea is that you do not pay off all the capital borrowed during the life of the loan, but end up with a baloon payment which if you are financing a car can be met by selling the old one when you trade up. Not such a good idea if it is your house, as you will have to refinance, unless you have been able to save up the capital elsewhere. To pay off a 50000 loan at 7.5 - 8.5% interst over 15 years would require payments of about 500 - 550 per month, your loan company should be able to tell you the exact figures, so you will be underpaying by about 120 -170 per month which really adds up. Personally I would like a nice fixed term loan that I knew I was paying off.