How to Lower Your Car Payment Using a Home Equity Loan
One of the main advantages of a home equity loan is that the interest is tax-deductible on up to $100,000 worth of borrowing.
For example, if you're in the 28% tax racket and the loan has an annual percentage rate of 7%, your effective rate after taxes comes out to 5.04%.
But a word of caution: If you don't have the discipline to pay more than the minimum payment on a home equity loan, then it's not a good idea to get one.
If you stretch out your car payments over 10 years or more, you're going to end up paying more in interest than if you had taken out a regular car loan.
Another disadvantage: If you can't make payments on the car, not only is your vehicle at risk, but so is your home since you put it up for collateral.
If you're unsure whether you can pay off the loan, don't even think about getting a home equity loan.
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- Gregg Fidan
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