JAXKXX

Any of you guys have purchased new C6 with Home equity loans? Is this a good idea or just go with regular car loan.

crawfish333

No, I have not and would not put my house up for collateral for a car loan, but that is just me. Now the pros and cons:

Pro If you itemize AND you are not borrowing more than the value of your house, you may be able to deduct the interest. (not a tax guy, so I am not sure)

Cons:

If a fianacial disaster hits, wouldn't you rather lose a car than a house?

With car loans at dirt cheap rates, does it make sense to borrow against your largest non-cash asset?

What if some event occurs where the equity is needed for illness, natural disaster, etc? (we know about those natural disasters here in Louisiana.)

Sorry to be so negative, but this seems like a real bad idea to me...

Good luck with whatever decision you make.

ROADKILL2007

I'd check the rate you get for each. The main consideration, however is the tax deduction you get with a equity line versus a regular car loan. The effective rate on the home equity with a tax deduction is Rate*(1-marginal tax rate). So if your marginal tax rate is 30% and a home equity loan on a pre-tax basis is 8% the effective after-tax rate is 8% multiplied by .70 which is 5.6%. Therefore, unless you get an auto loan for less than 5.6% you would be better off with a home equity loan.

JFTaylor

Sorry Fish

I am a finance guy and it's a no brainer cuz:

Home equity loan is 5.5 to 6%
Car loans about the same but . . .

The Home loan is tax deductable. Depending on your tax bracket that deduction of $1000 or more a month means 250-350 more in your pocket each month.

If you do finance the house just make sure it's for 5 years.

Send a PM if still unsure. JT

AORoads

there is a limit on deductibility of home eq loans, I believe. plus, it's not a good idea to finance a depreciating asset against your home.

JFTaylor

Don't know but a 2nd Mortage is 100% deductable.

FortMorganAl

Yep. I use my line of credit for any large purchase. Of course, I quickly pay it off unless I really want to stay 100%+ invested. A HELOC is the greatest thing since sliced bread. Whenever you want to buy anything like a piece of land or a car or whatever, you just call the bank and tell them how much you want the cashier's check written for. Then you stop off and pick up the check. In the next month or so you arrange whatever financing you want to pay it off and you're ready for the next purchase. After taxes the interest rate is about as low as you'll find anywhere.

Right now my APR is 8.25% (not the best but not bad). You only HAVE to pay interest so theoretically the monthly payment on a $50K car is $343.75. And if things REALLY get tight you can borrow the $350 from the HELOC.

As far as losing your house, there is NO reason you would ever lose a house. Worst comes to worst you file for bankruptcy. Current law says you get to keep the house. But if you're that hard up you should be looking at an Aveo and not a Corvette.

jklarkpimp

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POACHR

HELOCs are great if you know how to use them, but can be very dangerous if you are unfamiliar

UNKNOWN

If you can afford to pay in full, cash--- then it's prolly a good idea to put 1/2 down and pay off the HLOC balance in 1 year. (the other 1/2)

If you -must- use your house, you may want to reconsider your purchase.

Jimbeaux

OregonC6

One mortgage is enough. If you can't make your car payments they come and take the car. That would be a sad day but you still have an indoor toilet and place to sleep.

You can buy a transportation car for a thou or less to get to work etc.if your vette is a daily driver/only car.

It's not a matter of what is the better interest rate IMO it's all about control of your life and who you want to hand more of that over to....and for what? A car you can live without ( well, perhaps you can't I don't know )

good luck.

entwood

Yes, I did it. I was about to refinance anyway, so I took equity out to pay cash for car. I felt it put me in good bargaining position to shop around for vette. I did get 5.6% and itemize with 4 kids. I hold title and feel I could liquidate vette fairly quickly. We have a ton of equity left and will be selling house in 5 years, so these are all particulars to me.
I would not recommend it to a young person.

COAndy

I agree with most of your points. However, as long as he has some cash (say, $5,000-$7,000) socked away for emergencies, and is saving for retirement, I see no problem with it.

FortMorganAl

Yes, there is a limit. The limit is $100K. That's a XLR, not a Corvette.

And can someone explain to me how anyone can lose a house by buying a car with a HELOC? If you sell the car (that you own free and clear) you will have plenty of money to make many years worth of interest payments on the HELOC. Even with several years depreciation you could still get enough from the car to coast for 10 years or more. Yes, you would have that debt hanging out there but you also have equity in the house or you would have never gotten the loan in the first place.

No, HELOC is not for newly weds just out of college. They have no equity. Once you have equity and are not living hand to mouth, what is the difference between equity in a car for a car loan or equity in a house for a house loan? The difference is the car loan payments cost a lot more and, if you miss a few, they take the car. With the HELOC you have much lower payments and if money gets tight you can sell the car tomorrow to raise plenty of cash to keep up the house loan payments.

jschindler

Forget the math - it's a horrible decision. When you are ready to retire, you won't have your house paid for, and you'll which you had. Finances are less about the math, and more about the mind-set. The mind set should be to build equity in your home rather than take equity out of your home to put it into a depreciating asset.

You will get advice from people smarter than me, but don't blame me if you can't afford to retire at 65 years old.

jschindler

The difference is that most people who go that route will end up with no equity in either the car or the house. Yes, there will be exceptions to every rule, but they would be just that - exceptions.

FortMorganAl

And that "majority" are living hand to mouth and won't have equity in either no matter which way they go.

LloydP

A home equity loan vs a car loan?

A no brainer. The interest on the home equity loan is deductible vs the car loan is not.

A loss (paying interest) is bad but a tax deductble loss is less bad.

You are no more likely to loose your house with a home equity loan than a car loan. If something goes wrong, you are still liable for the full value of either.

An absolute No Brainer.

kpflynn

You bought your Corvette using a HELOC living in the poster city for the real estate bubble?