dave asked:


I’ve read other replies, and know the consensus on home equity loans and buying a car. However, we’re looking for another used vehicle as we just sold our other one, and it’s a matter of a requirement purchase than a luxury purchase.

I’ve been receiving letters from our bank lately where they are offering us a line of credit at 3.6%, since our home has more than enough positive equity towards it (even in this current market). The other loans I can find through my credit union or other places are at higher interest rates, like 5.5% - 7% financing. We’ve already sold our other car and have money to put down towards a replacement, but wanted to finance a smaller amount of around approx $14k. We have the cash available but don’t to be wiped out from spending it all on this vehicle. Thus, eitherway we’re going to finance the $14k over the next 36 months as we can cover the monthly payments no problem.

The question is, what are your thoughts on using the line of credit at 3.6% for the next 3 years at $14k, as opposed to getting a ‘traditional’ auto loan at double the interest rate for the same amount & terms? The other positive I see from this is the interest will be tax deductable. But are there really any specific issues that we should be aware of if deciding to take out the home equity loan for the vehicle?