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How to Lower Your Car Payment Using a Home Equity Loan

If you own your own home and have built up equity over the years, getting a home equity loan to finance your car purchase may be a good option.

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.

3 Steps Every Car Buyer Needs to Take to Save Maximum Money

The key to getting the best deal is to gather price or lease bids from as many local dealers as possible. Then shop that best price around until no one can beat it. Here are the steps:

Step 1 Get Prices From My Trusted Network

Select the vehicle you're interested in to see if there are local dealers in my network who will provide you with their best upfront price. You will get direct access to an internet sales manager who you can further negotiate with online (no need to visit dealership).
Select Vehicle to Get Local Pricing

Step 2 Get Prices From TrueCar / CarsDirect

TrueCar, and CarsDirect are my top 2 online price quote recommendations. These services show you pre-negotiated prices from dealers closest to you - and the deals are usually pretty decent. But remember, you can still negotiate further.

Step 3 Complete my Checklist

Follow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan

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About The Author

Gregg Fidan Gregg Fidan is the founder of RealCarTips. After being ripped off on his first car purchase, he devoted several years to figuring out the best ways to avoid scams and negotiate the best car deals. He has written hundreds of articles on the subject of car buying and taught thousands of car shoppers how to get the best deals.
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