Posted on: 22 June 2015
If you have started looking for a car to buy to replace your old one and are trying to determine how to pay for this new purchase, there are several options. The most popular way is through an auto loan, but you might benefit more by taking a home equity loan for this purchase. Here are four reasons you may want to use funds from a home equity loan to buy your next car.
Taking a car loan is one way to purchase your new vehicle, but using money from a home equity loan might be a better option, because the interest rates on home equity loans are often lower than the rates on auto loans. Getting a lower interest rate will result in lower monthly payments, and it will also help you pay less overall for the purchase.
One of the most important benefits of financing your car through a home equity loan is that this method may give you the freedom to write off the interest you pay on the loan. Auto loan interest is never tax-deductible; however, the interest you pay on a home equity loan usually is. When you write off interest on your taxes, it can reduce your taxable income, which will often cause your tax liability to decrease.
You'll have the title
Another benefit you may not realize is that when you use money from a home equity loan to buy a car, you will not have a lien on the vehicle. The transaction will be considered a cash purchase and you will receive the title for the vehicle right away.
The advantage of this is that if you ever needed cash, you could quickly sell the car to get the money you need. It is easier and faster to sell a car you own if you already have the title for it.
You could save money on insurance
Because there is no lien on the vehicle, you will not be required to carry full-coverage insurance on the car. Full-coverage insurance is a lot more costly than liability coverage only, and this could help you save even more money, which is an important thing to think about if you are considering buying a car with a home equity loan.
If you can get a low interest rate through a home equity loan, this could be a better way to buy your next vehicle. To learn more or to apply for a home equity loan, contact a lender like MCS Bank today.Share