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

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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

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 9 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.


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