Can a finance company charge a balloon payment of interest if it’s not in the contract?

UPDATED: Dec 8, 2011

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Can a finance company charge a balloon payment of interest if it’s not in the contract?

The contract says nothing about a balloon payment. It states the final payment as the same as every month. Now that final payment has been made they are saying we owe another $1100 as a balloon payment of interest.

Asked on December 8, 2011 under Bankruptcy Law, California


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

The written agreement that you have with the lender controls the obligation you have. read it carefully in that it controls in the absence of conflicting state law. Possibly the last payment is stated in the agreement as part of a monthly payment, or the loan agreement sets forth the number of payments in monthly installments with a set number of months?

I would ask the finance company for an explanation as to why it believes that there is a balloon payment on the loan that you have written about. Its explanantion will assist you in trying to ascertain language in the loan agreement supporting the claim for the ballon $1,100.00 payment of interest. Usually, when one pays on a loan, the initial payments are weighted heavily in interest payments and the ending payments are weighted mostly for principal.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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