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Home Equity Auto Loans

Using a Home Equity Line of Credit to Buy a Car Should I use a home equity line of credit to buy a car? There are several advantages of using a home equity line of credit to buy a car instead of getting a car loan. Advantages of Home Equity Auto Loans A home equity loan is often a less expensive option than a traditional car loan, and the cost difference is increased with the length of the loan. You can usually get a home equity loan at a lower interest rate than an auto loan, but the biggest advantage is that home equity loans are tax deductible, which could lead to a large amount of savings. Home Equity Auto Loans vs. a Traditional Auto Loan Unless the home equity lender doesn't charge any fees, it is difficult to compare interest rates between a traditional auto loan and a home equity auto loan, because up-front fees are folded into the auto loan's APR. A good rule of thumb is that an auto loan is cheaper only when it has a rock bottom, promotional interest rate subsidized by the auto maker. If you are thinking of moving in a few years, you might shy away from a home equity auto loan no matter what the cost difference. Home Equity Line of Credit for Auto Loan How does a home equity auto loan line of credit work? In most instances, you may borrow up to 75% of the appraised value of your home (minus the amount you owe on your home loan). For example, if your home is appraised at $100,000, and you owe $50,000 on the home, you could get a credit line of $25,000. You can use this home equity line of credit as a "home equity auto loan."
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