De Kock of Wesbank says that one of main reasons vehicle applications are declined is because of the applicant’s credit report.
Insurance companies use credit scores calculated from the same credit reports. The calculations are tweaked a bit but largely reflect your credit situation. Insurers pay attention to your credit report because it’s seen as a predictor of claims — and car insurance companies hate claims.
“In practice, however, the vehicle repayments are often not made to the bank and the account will be left in arrears, leaving the original owner without a vehicle and still being held responsible for the remaining debt on the account.
You ask “how bad can a balloon repayment be?”. Bad, very bad.
The number of South African consumers who opt for balloon payments when financing their vehicle has fallen significantly over the (past) four years, down from 22% in July 2007 to 9,5% in June this year.