Asset finance is one way to get your new asset sooner. It allows you to obtain larger assets through hire or lease without purchasing the asset outright. Asset finance for personal and business use has a few benefits. These include:

•   Can reduce more considerable loan costs
•   Frees up capital
•   Improves your cash flow
•   Gets you your new asset sooner

Equipment finance is great for businesses that use various machinery, tools and equipment as part of their daily operations. It can be used for a range of things, including:

•   Work tools
•   Trade tools
•   Office computers
•   Heavy machinery
•   Farming equipment

Balloon payments refer to a lump sum of money owed to the lender that generally lands after your loan term. Although owing a chunk of money doesn’t sound ideal, it can help the borrower decrease their monthly payments throughout the life of the loan. Terms can often be negotiated with a lender.

A balloon payment varies in size from lender to lender. Generally, the maximum amount lenders cap balloon payments at is 50 per cent of the total loan amount. This means if you have a 50 per cent balloon on a $30,000 car loan, you will pay a balloon payment of $15,000 at the end of your loan.

Like a balloon payment, loan terms differ between each lender, but they are usually between one and seven years for asset finance. It’s important to keep in mind that the longer the loan term, the more interest you’ll pay.

When looking at the difference between a car loan and novated lease, the following can be determined:

•   Both have regular repayments.
•   Both have the chance to include a balloon amount at the end of the loan.
•   A novated lease is a three-way deal between you, the lender, and your employer.
•   With a car loan, you own the vehicle from day one.
•   With a novated lease, you own the vehicle when the term ends, and you pay the balloon.
•   A car loan is paid with after-tax earnings and a novated lease from pre or post-tax pay.