I'm starting to get second thoughts about getting a home equity loan for 10k. Is it stupid to use it on something that depreciates such as a car? Am I the only one doing this? Someone please tell me it's worth it for a Z, or that I'm a dumbass. Thanks...

 

there is nothing wrong with using a home equ loan. obviously you get to write off more interest than a typical auto loan. I would be using one if I wasn't selling my house.

 

Nothing wrong with it. I plan to do it too if the rates are good. Right now I'm worrying about it later since I just got through my refi and I don't expect my car till Oct. Nov.

Oh btw, if anyone is planning to refi... do it before you get the Z so you don't have a 30K outstanding loan on your credit report.

 

It makes perfect sense to use home equity to pay for your car. In this manner you get to deduct the interest from your taxes.

I'm sure there is a much better, more technical reason behind it, but I sucked in econ.

 

With the current rates on car loans of around 5% it is almost not worth it to take out a home equity for the car, but if you do make sure there are no processing fees or points and the rate would have to be around 7.5 or higher to make sense.

 

I'm with a credit union that has a courtesy lien program for homeowners. The interest rate is 5.70% plus you get to deduct the interest. Both my wife and I have pre-approved car loans on our accounts to use whenever; so this is how I'm financing my Z. Zero down payment; I need all the deductions I can get.

 

Use the home equity unless you can get a car loan roughly 1.75-2% lower than you home quity loan rate. The interest is tax deductible, but it is not a dollar for dollar tax savings. The tax benefit is your marginal tax rate. If you are in the 28% bracket you would reduce your taxes by $28 for every $100 in interest you pay. So if you can get a car loan that lowers your car payment by more than $28 dollars due to a lower interest rate you would be better off with the car loan. However, I don't think you will find one that will do it on a Z since I doubt we will see subsidizes loans for the Z. The other thing a home equity loan does for you is it lets you control your payment. For example if you have some unexpected expenses you could reduce the amount you pay on your line to help make the unexpected expense. This happens because most home equity loans only require a payment equal to 1.5% of the amount outstanding.

 

There's nothing wrong with using your home equity to purchase a car if you keep that car a good deal of time. The real trap to avoid is changing cars every 2 to 3 years no matter which way you finance.
Come to think of it that's one of the best things about a Z. My '88 has 259K on it and I'm really not tired of it at all - mostly due to the fact it's not nickel and dimeing me to death like a Corvette would with similar miles. You get a real admiration from a Z that grows over the years - not many other cars come close.

 

I feel better now. I'm surprised at the quick replies to a somewhat dull topic. Try asking that one at a honda forum.

 

Im thinking about doing this too. Havent quite decided yet.

 

That's because we care about our fellow Z owners. Actually I am glued to this damn forum to see any threads that may pop up with someone receiving their Z so I can high tail it out of here down to my dealer to keep an eye out for mine so in the meantime spread some wisdom!?

 

Quick question - if anyone has looked into this, how long does it take after you apply to get your line of credit?
My car will be here in about 27 days, assuming I apply tomorrow would it work out?

 

It's not the quickest of processes, because they usually will want to verify your income, go over all your debts and payments, have the house appraised and do all of the paperwork, if everything goes smoothly 1-2 weeks.

 

If you get the loan from the same bank as your mortgage, it is much faster. I got a $40K equity line over the phone within 15 minutes. But I also work for the same bank.

It is the way to go while I am waiting for the stock market to recover some.

 

I'm doing the home equity line of credit for my Z.

Two points. With everyone doing the refinance thing now it may take longer than 4 weeks to go through, so get started now. If you have to get a regular car loan and pay it off as soon as the line of credit or home equity loan goes through as ther is usually no early payment penalty on a car loan.

Second if you do it don't take 30 years to pay off the car, if you do you will end up payinf more in interest than you did for the car, try to pay it off in 3 years.

 

Rai, there is a rule which many car loans contain called The Rule of Seven Eights. Basically this rule places the lions share of the interest debt at the front of the loan so that the intrest portion of the debt is retired FIRST more so than the principal. Thus costing you much more to get out early.Therefore ,depending how long you have the loan the more interest you pay in the front part of the loan.If you stay in more than a year or two,depending on the loan period, you have already paid a large share of the intrest expense for the entire loan period. Hope this helps. some of you who make a living in finance please feel free to clarify, expound or correct , if I have erred. Bottom line, once they have initiated the loan you will pay a disproportionate share of the interest even if you pay it off early. Banks typically use this tactic. Credit unions often do not.

Hope this helps...

 

Yes.Home equity the way to go.

 

That's a rip off. I never knew this and I usually pay my loans off early so I have been getting screwed all this time. From now on I will use home equity line of credit.

Thanks for the tip.