SHOULD I USE MY LINE OF CREDIT TO BUY A NEW CAR?
SHOULD I USE MY LINE OF CREDIT TO BUY A NEW CAR?
Posted on June 7, 2023
Customers often ask us if it’s a good idea to use their line of credit to pay for a new vehicle loan. We typically don’t recommend it. Here’s why.
Reasons NOT to Use Your Line of Credit to Buy a Car
#1 Most secured lines of credit use your home as collateral. That means if for whatever reason you default on a payment, the bank can seize your home.
#2 Your line of credit may have a floating interest rate which moves up and down with the rest of the market. With a car loan, your rate is fixed over the course of your term, meaning it cannot change.
#3 If the bank begins to see you as increasingly risky to lend to, they can demand payment in full. With a car loan, you have an agreed upon time to pay it off, up to 96 months. You can choose to pay it off earlier if you want to, but we will never ask or pressure you to do so.
#4 The bank has the right to withdraw money from your account to pay for your line of credit. As a dealer, we can never withdraw money from your account, with or without your permission.
#5 Your home insurance payments could go up as a result of the additional usage of credit.