Ballon loan

Balloon loans are one of the financial tools used by “Meny Group.” A loan has several notable advantages for the borrower, including the ability to enjoy large sums of money that can be used to purchase real estate assets, release a property lien, and more.

This article will provide you with a thorough understanding of the characteristics of balloon loans. A loan that is a prominent financial tool of the “Manny Group.” This is so you can get a general idea and a broad picture of the various characteristics of this loan and whether it is the right one for you.

Types of balloon loans

As previously stated, a balloon loan is a loan that is repaid at the end of a predetermined period. The balloon loan is classified into two types. A partial balloon loan is one in which borrowers pay interest on an ongoing basis throughout the loan’s term and the principal at the end. The second loan is a full balloon loan, which means that the interest and principal are both paid at the end of the period.

The professionals at “Meny Group” will be able to provide you with these two products while remaining flexible to your financial situation and adjusting the loan to the most comfortable terms possible.

What is the origin of the loan’s name?

A balloon loan is so named because it is a “inflatable” loan that accumulates the index or indexation over time, and in cases where it is a full balloon loan, the “inflated” is also reflected in the interest rate.

A balloon loan for the purchase of an apartment

A balloon loan can also serve as a bridging loan, which is given to borrowers who want to buy an apartment before selling their current one. In these cases, a short-term loan is required, with the loan being repaid through the sale of the apartment.

This situation occurs when a borrower is exposed to a profitable real estate transaction. The same borrower, who knows the sale of his existing property will take too long, enjoys an immediate loan in an amount that allows him to purchase the same new property he desires and once he sells his old property, he will be able to repay the same loan he took.

Today, when the real estate market in Israel is in uncertainty, balloon loans are a solution that enables many to make moves and purchases, while being able to enjoy a more convenient and lenient loan.

Interest payment on a balloon loan

Borrowers should be aware that the interest rate on a balloon loan is considered higher than in other loan frameworks. The reason for this is that the entity granting the loan does not immediately receive the principal, so the risk it assumes is deemed higher. 

Careful and responsible use of taking a balloon loan

A balloon loan is a loan that has the ability to see and understand the urgency of the borrower’s situation, which is currently in a state of lack of financial liquidity, when it is supposed to change significantly in his favor significantly in a short period of time, knowing that he is supposed to enjoy a large amount of money that he is supposed to receive (selling an asset, using a study fund, etc.).

Along with the idea facing it, borrowers must recognize that there is a need to repay the loan amount, as well as a high interest rate. These loans have been extended several times for lengthy periods of 4-5 years. Because of fluctuations and dynamics in the financial world that he obviously did not anticipate, the borrower is in a more precarious financial situation than expected for the duration of the period.

Balloon loan – main points:

• Categorized under two types – partial or full balloon loan.
• A loan that is provided in most cases for a period of two years.
• Interest rates are considered higher compared to other loans.
• A loan that can also be used for the purchase of a car and for the establishment of a            business.
• A loan that is considered more worthwhile if the loan term is not extended to more than three years.