One of the financial tools of the “Meni Group” is a balloon loan. A loan has a number of prominent advantages for the borrower and one that allows him to enjoy large sums that will enable him, among other things, to purchase real estate assets, release a lien on an asset, and more.

In this article, you will get to know in depth the characteristics of a balloon loan. A loan that is a prominent financial tool of the “Meni Group”. This is so that you can get an initial idea and a broad picture about the various characteristics of this loan and whether it is suitable and preferred for you.

Types of balloon loans

A balloon loan is, as mentioned, a loan that is repaid at the end of a predefined period. The balloon loan can be divided into two main types. The first is a partial balloon loan, in which the borrowers pay the interest on an ongoing basis throughout the loan period and the principal at the end of the term. The second loan is a full balloon loan – a loan in which the interest and principal are paid together at the end of the period.

The professionals at Mani Group will be able to provide you with these two products, while being able to show maximum flexibility to your financial situation and adjust the loan to the terms that will be as convenient as possible.

What is the origin of the name for this loan?

A balloon loan is so called due to the fact that it is an “inflated” loan over time, as it accumulates the index or linkage, and in cases where it is a full balloon loan, “inflated” is also reflected in the interest rate.

Balloon loan for the purchase of an apartment

A balloon loan can also be used as a bridging loan – one that is given to borrowers who are interested in purchasing an apartment for themselves before selling their current apartment. In these cases, the need for a short-term loan arises, when the repayment of the loan will be done, in fact, with the sale of the apartment.

This situation, in which the borrower is exposed to a worthwhile real estate transaction, when he must act within the immediate time frame in order to secure a new real estate property for himself, happens in many cases. So a balloon loan and its convenient features are a great solution.

The borrower, who is aware of the fact that the sale of his existing property will take too long, enjoys an immediate loan in an amount that allows him to purchase the new property he desires, and as soon as 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 uncertain, the balloon loan is a solution that allows many to make moves and purchases, while being able to enjoy a more convenient and lenient loan.

Paying the interest on a balloon loan

Borrowers should be aware that in the framework of a balloon loan, the interest rate is considered higher than in other loan frameworks. The reason for this lies in the fact that the entity granting the loan does not immediately receive the fund, and hence the risk it takes on itself is considered 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 at the current point in time in a state of lack of financial liquidity, when this is supposed to change significantly in his favor in a short period of time, knowing that he is supposed to benefit from a large sum of money that he is supposed to receive (selling a property, using a study fund, etc.).

Alongside the idea in front of it, borrowers must recognize that in this loan as well, there is a need to repay the loan amount, along with an interest rate that is considered high. Often, these loans are extended for long periods of 4-5 years, when at the time of the period the borrower is in a precarious financial situation than he expected, due to fluctuations and dynamics in the financial world that he probably did not anticipate.

Balloon Loan – Key Points:

• It is categorized under two types – a partial or full balloon loan.

• A loan that is given in most cases for a period of two years.

• The interest rate is considered higher than 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 period is not extended to more than three years.

Interested in exploring the possibility of a balloon loan within our framework? Contact us another day to schedule an appointment.