Home Equity Loan
Anyone pay off a car with your home equity line?
I'm thinking about paying off our car with our home equity line of credit. It has a lower rate than the car loan ( i know, i don't have the best credit). We're not looking at moving soon, if ever. And what's really making me think about it is the fact that when i send in an extra payment on the car, they take interest out of the dang thing. So i can't seem to pay it down quicker! But when i sent in extra payments on our equity line it went straight to principal. And we actually payed off about half the amount of the car in a year. Anyone out there done this? Anyone work in the field and have feedback? Any other feedback? :) I'm thinking about still making my regular car payment amount...... plus extra. So even though it's over 20 years, I'll pay it as if it's on a 5 year schedule.
Public Comments
- I have done this, but only because I knew I would be moving in the near future and wanted to lower my payment. If I knew I would really be paying it over 20 years, I wouldn't have done it.....the car would end up costing a fortune if you pay it over that time frame. Think about your situation first.
- Using your home equity line to pay off or buy a car is an excellent idea. Not only do you get the lower rate, but you can write the interest off on your taxes (assuming your in the USA). I have used my home equity to buy my last two cars and haven't regretted it at all.
- Don't play with your equity unless absolutely necessary. What we have done is at work we have entered our W-40's as single and no dependents even though we are married with 2 kids. By filing that way the goverment takes out more money than they should out of our paychecks so when we did our tax return we got nearly $7,000 back. That's a good chunk of change to pay bills.
- I think it's a great idea, but you have to consider how fast your really going to pay it off. You don't want the car to end up being worth less than the amount you are holding on your home equity. Other wise known as beeing upside down on your loan. You'll get the tax deductability off the interest on the home equity(most likely, ask your accountant just to confirm). Look into credit union options of what they call a auto equity loan, which means you use the equity in your home for collateral for the car and you still get tax deductability and you get a fixed payment instead of it being on the home equity line. I have seen many people do it either way, but really depends on your life style situation. last piece of info - never let your debts over run your assets. if your home, car, and savings is less than the mortgage, auto loan and credit card debt then be very careful... if you can keep all debts less than or equal to asset value than you will have the oppurtunity to sell them to pay them off if your were ever in a very bad economic situation
