Media: Choose "balloon loan" rationally, with small monthly payment and large principal repayment in the last installment
Compared with ordinary repayment methods, the initial repayment amount of a "balloon loan" is smaller, but when the loan matures, the borrower needs to repay the remaining large portion of the loan principal in one lump sum.
In addition to the "balloon loan", there are other "interest first, principal later" products on the market. Borrowers should reasonably assess their repayment ability and choose a repayment method that suits them.
Recently, a bank has been promoting various credit products such as "Balloon Loan" on its official WeChat public account, which have a "interest first, principal later" repayment method. Compared with ordinary repayment methods, the repayment amount of "Balloon Loan" is smaller in the early stage, and when the loan expires, the borrower needs to repay the remaining principal in one lump sum. Because it is "small in the beginning and big in the end" like a balloon, it is named "Balloon Loan".
The reporter called the bank's official customer service and learned that the "balloon loan" was previously applicable to existing customers who signed loan contracts before September 2019. At present, this repayment method is only applicable to mortgage customers of commercial and residential properties after September 2019, as well as new mortgage customers who apply for commercial and residential properties, and is subject to local regulatory policy requirements and final loan approval opinions.
Zhang Dawei, chief analyst at Centaline Property, said that "balloon loans" have always existed, mainly for operating loans, which can reduce the initial repayment pressure of borrowers. Such products are generally short-term and the accumulated interest ratio is not high.
It is understood that in addition to the "balloon loan", there are other "interest first, principal later" products on the market. For example, a certain bank's "easy payment" divides personal housing loans into two stages within the loan period: the first stage is to repay the principal of 1 yuan and the loan interest to be repaid that month on a monthly basis, and the term can be determined by the borrower according to the needs of the borrower, with a maximum period of no more than 3 years; the second stage is to repay the remaining loan principal in the remaining loan period in the conventional equal principal payment method. For another example, a certain bank's "pay with salary" allows medium- and long-term personal mortgage loan customers to apply for not repaying the principal within a certain period of time, and only repay the loan interest on schedule, and then repay the loan principal and interest on schedule after the agreed period expires.
Dong Ximiao, chief researcher of China UnionPay, said that there are many "micro-innovations" in the repayment methods of personal housing loans in the market. This kind of flexible repayment method is mainly aimed at two groups of people: one is new citizens with low income in the short term and high repayment pressure; the other is young people who have not worked for a long time but whose income is expected to increase in the future. Lower initial repayment pressure and flexible repayment methods can help alleviate short-term repayment pressure and balance income and expenditure over a longer period. Commercial banks are within the authority of independent operation to innovate personal housing loan products in accordance with institutional regulations, such as adopting more flexible repayment methods, appropriately extending loan terms, and reducing loan down payment ratios and interest rates.
For banks, providing differentiated and personalized services to meet the actual needs of different borrowers will help improve the competitiveness of products, thereby reducing the pressure of early repayment, expanding market share and promoting the smooth development of housing loan business.
However, Yan Yuejin, research director of E-House Research Institute, warned that credit products such as "balloon loans" are prone to lax quality control. From the perspective of risk control, it is necessary to do a good job in calculating the cash flow of such loan repayment funds. Yan Yuejin suggested that the repayment dynamics should be closely monitored, and the repayment sources and repayment pressure of the borrowers should be kept under constant attention. At the same time, the number of similar businesses should be capped to avoid risks caused by too many businesses concentrated in the same field.
Dong Ximiao said that the introduction of flexible and diverse repayment methods by banks will generally help reduce the pressure on borrowers to repay their loans in the early stages, thereby stimulating residents' housing consumption demand and boosting their willingness and ability to consume housing. At the same time, these flexible repayment methods should be viewed comprehensively and rationally.
Dong Ximiao believes that, on the one hand, commercial banks should improve their position, balance the relationship between profitability and functionality, and conscientiously and comprehensively implement policy requirements. On the other hand, for borrowers, this type of product is just a change in the repayment method, because the principal has not been repaid in the early stage, and the total amount of loan principal and interest to be repaid may increase. Borrowers should reasonably assess their repayment ability based on personal and family needs, rationally apply for personal housing loans, and choose a repayment method that suits them.
