Is taking a home equity loan to buy new vehicle and pay bills the smart way to go?
If you have good credit you can probably get a new car loan for about 6-8%, according to the area you live. All mortgages are equity loans, because you are borrowing against the equity on your home. Typically, a home equity loan is considered a loan on your home when you already have a mortgage. I your home is paid in full then you would really just be getting a mortgage. I haven't checked mortgage rates for a while, but you should be able to get a mortgage, with good credit, in the 6+ range. By getting a mortgage to pay for your new car, you can write the interest off on your taxes. You have to be careful, of course, because you are risking your home. I hope this helps a little.
If you have unpaid bills, then I would not be going out to by a new car. First, get the bills under control. Do you need a new car? I would take care of my bills first, weigh the pro's and cons of purchasing a new car. THEN - go to your banker or financial advisor and get their opinion. It really depends on your situation and interest rates.
If your house is paid for, it's not a bad idea, just remember that will be another monthly bill to add to your budget. The rates are good right now so I'd check it out. Just make sure you explore all your options and work out what the monthly bills will be before you sign on the dotted line. I made the mistake of getting a home equity loan and buying a new car at the same time. I paid off some credit card debts but within a year started using them again. Once you pay them off, cut them up and don't use them again then the loan will be worth it.
Check out the interest rates on new car loans first. Some manufacturers are offering rates under 3%. You won't beat that with a home equity line of credit, even if you take the deductibility into account. Plus the line of credit probably has a variable and Bush and company unable to say "no" to any spending interest rates are only going to go higher.
It's all about net present value of your cash vs. the toys.
Are you going to make enough cash to cover the loan in the immediate future; or is it worth it to you to get the new toys and pay the finance fee over time?
It's clear that that banks want the later; so if you're comfortable paying the finance fees, then enjoy the toys.
Net present value = Is what I want worth more to me now than what I would pay if I saved up for it over time.
http://www.choicefinance.net/home-equity-loan.htm
do you know that your are going to be paying for that car for the next 30 years at a percentage rate of appox. 6 percent you can get a car loan cheaper than that. As for the bills you have take a good look at the percentage you are paying (credit cards) can be very high. you might want to get a line of credit on your home to pay only these bills off. With the line of credit you only pay interest on the amount you actually use.
nope because you might lose your house
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