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Home Equity Auto Loan

Homeowners might be able to use their home to finance the purchase of their vehicle. Through an arrangement called a home equity auto loan, a homeowner can tap into their home value to finance a car purchase.

Equity is the difference between the value of a home and the amount the property is mortgaged for. If a house is mortgaged for $75,000 but worth $200,000 the home owner’s would have $125,000 worth of equity to borrow against. This means the home owner could be able to borrow up to $125,000 for vehicle purchase.

Those who own their own homes should always consider getting a home equity auto loan when they go car shopping because home equity auto loans are a much better deal than traditional car loans.

Advantages to a Home Equity Auto Loan

The biggest advantage to a home equity auto loan is that it usually comes with a much lower interest rate than a traditional car loan. Home equity loan interest rates are usually much the same as the mortgage rate which is usually between 4% and 10% most car loans with a 15% or higher interest rate. A person can save quite a bit of money with a home equity auto loan.

Another advantage to an equity auto loan is that it will take several years to pay off unlike a traditional car loan. This means that the equity will still be available in the future when a person needs to buy a replacement car.

Since home equity auto loans are based on real estate value a person might get a lot more money for car purchase with such a loan than with a traditional car loan. This can help a person buy a new car or a much better car than they would normally be able to get.

A final really big advantage to a home equity auto loan is that a person can get one before they car shopping. This means that you can walk onto the car lot approved for a loan and know exactly how much you can spend on a vehicle. A home equity auto loan can put a person in a good position to haggle with car sales people for a vehicle.

Disadvantages to a Home Equity Auto Loan

There are some serious disadvantages to a home equity auto loan, the biggest of which is that a home equity auto loan can increase the amount a person owes on their home. This can increase the likelihood of foreclosure and make it harder to pay off the mortgage. It also means that the individual will not be able to borrow as much money against the home in the future

Another big disadvantage is that taking out too many home equity loans can hurt your credit rating. This can make it harder to take out additional loans in the future.

Finding a Home Equity Auto Loan 

The first place to look for a home equity auto loan is the lender that holds the mortgage on your home. Simply call the lender or visit the lender’s website and check to see if they offer home equity auto loans.

Since you are already approved for a mortgage you should be able to get a home equity loan with a lot less paper work. You won’t have to go through a credit check or other steps and could quickly get the loan.

Another good place to search for home equity auto loans is online. There are many equity lenders on line and most of them offer home equity auto loans. Simply typing the words home equity auto loan into a search engine should help you locate these lenders.