Buy a Car By Using Your Home for Financing
by: Charles Essmeier
New cars and trucks have become quite expensive over the
years. Inflation only tells part of the story; a lot of the increase in
price is due to technology. Air bags, antilock brakes, and computer systems
that control everything have added to the price, too. On the plus side, cars
perform better and more safely than they did a generation ago. Safer or not,
cars are expensive, and buying one affordably is a problem that most
consumers eventually face.
The most affordable way to buy a new car or truck is to take advantage of
manufacturer-offered low interest rates, which can occasionally run as low
as zero percent. Those rates, while generous, aren't offered very often and
are generally available only to buyers with the highest credit scores.
Otherwise, consumers are generally forced to use other, more traditional,
lending options, such as bank loans or dealer financing. There is one other,
and often overlooked, financing option that may work well for a lot of
buyers - using a home equity loan.
A home equity loan is a loan that uses the portion of your house that you
own as collateral. If you have a house that is valued at $150,000 and you
still owe $100,000 on your mortgage, the remaining $50,000 is your equity.
Lenders will issue loans to consumers using that equity as collateral, and
there are some definite advantages for consumers who elect to do so:
Interest rates are more favorable - Interest rates for home loans are lower
than those for either unsecured loans, such as credit card loans, or car
loans. The rates can be several percent lower, saving the buyer quite a bit
over the life of the loan.
The interest is often tax deductible - Interest on most home equity loans is
deductible from Federal income tax, effectively reducing the interest rate
for the borrower.
Buyers who consider a home equity loan for financing should be aware that
they are putting their home at risk should they fail to pay off the loan.
Lenders could potentially foreclose and sell the home to recover their
money. Borrowers should also be careful to make sure that the repayment
schedule for the loan runs about the same length of time as the buyer
expects to own the car. Don't take out a loan with a ten year repayment
schedule if you only expect to have the car for four or five years.
The rising price of houses during the last five years has left millions of
Americans with substantial equity in their homes. If you are one of the
lucky ones, you might wish to consider using a home equity loan to finance
your next new car or truck.
About The Author
©Copyright 2006 by Retro Marketing. Charles Essmeier is the owner of Retro
Marketing. Retro Marketing, established in 1978, is a firm devoted to
informational Websites, including
http://www.LemonLawHelp.net, a site devoted to automobile lemon laws and
http://www.car-insurance-help.net, a site devoted to car insurance.
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