Why the practice of balloon car repayments is banned in many countries

Treasury is warning South Africans about balloon payments for car financing.

Treasury deputy director-general Ismail Momoniat told Parliament the Financial Services Board and the National Credit Regulator (NCR) weren’t tough enough and needed to do more to ensure financiers offering balloon payment products treat customers fairly.

Momoniat says he wants legislation introduced to enable the NCR to act against balloon payments on car loans at the end of repayment periods.

Balloon payments are illegal in many countries.

We interviewed Times Media consumer journalist Wendy Knowler about how balloon payments work and why they exist as well as Treasury’s warning.

Scroll down to listen to the interview.

It’s essentially a way for someone to buy a car they can’t afford. At the end of your repayment period you’re still liable to pay a huge lump sum. It’s a very stupid way to buy a car.

Wendy Knowler, consumer journalist

Balloon payments make up 18 percent of market leader Wesbank’s car financing.

Wendy Knowler, consumer journalist

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