BUYING A CAR WITH A HOME EQUITY LOAN
home equity loan or line of credit for
financing a new our used vehicle purchase may be a good idea.
However, you must be fiscally responsible with a keen understanding
of how to manage your finances. On the contrary, if you have
excessive debt and/or bad credit issues, a home equity loan is
likely not your best option.
Tax Breaks of Equity Mortgages
It is not possible for all consumers to utilize the interest rate
deduction from their mortgage when filing their tax returns.
However, if you are currently able to right off the interest from
your first mortgage, you will likely be able to do the same for your
home equity loan.
The effective rate of the interest of your
loan is lessened when you are able to deduct the interest
expenses. It is important to note that the interest associated
with conventional car loans are not tax deductible. Currently,
the national average for home equity lines of credit (HELOC) is
8.02 percent and 7.5 percent for equity loans. For a four year
used auto loan, the national average for financing is around 9
percent. If you fall into the 25-percent marginal federal income
tax bracket the efficient rate on the HELOC is about 5.75
Home Equity Lines of Credit
An equity line of credit is a variable rate loan with its
associated interest rates based on the prime rate. Prime rises
in relation to the targeted federal funds rate. The federal
funds rate has been steadily increasing over the past two years.
It takes someone with strong nerves to apply for a HELOC for
financing your automobile.
On the other hand, a home equity loan can have a fixed interest
rate. Also, the loan payments are self-amortizing. This means
that the payments are large enough to pay off the interest cost
and pay off the loan over the life of the loan. In the first few
years of an equity loan, required loan payments are going to be
interest only. Therefore, you must have extreme financial
obedience to make principal payments as well. Choice Personal
Loans, Inc. offers a variety of
home equity loan options.
A car depreciates in value. It is not practical to take ten
years to pay off a loan for an automobile that you will only
drive for five or so years. No matter which type of equity
product you decide to choose for financing your car, anticipate
paying off your vehicle over the time you expect to own it.
Doing so will result in you encompassing equity in your car when
you go to buy a new one.
We also suggest reading the
secured loan guide if you are considering applying for a
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