How to Lower Your Car Payment Using a Home Equity LoanIf 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.
Each week, I'll keep you up-to-date on the latest car deals and news that might affect your purchase. This includes...
- Best Rebates, Incentives, and Lease Deals
- Latest Car Buying Scams and Tricks
- The Best & Worst Time to Buy a Car
- Which Cars You Should Avoid