Should I use a home equity loan to buy a car?

Key points

• Choosing between auto and home equity loan types can change your total cost of buying a car.
• Home equity loan interest may reduce your federal taxes, lowering your real borrowing cost.
• Comparing fees and true interest rates helps reveal which loan is financially smarter.
• Missing payments puts your car at risk with an auto loan and your home at risk with a home equity loan.

This calculator helps you to determine whether using an auto loan or a home equity loan is the better choice for you when buying a car. Interest on home equity loans may be deducted from your federal income taxes, resulting in a lower effective interest rate. However, closing costs and after-tax interest rates also factor into the equation. Compare these factors for each of the two loans to decide which is the most financially beneficial to you. With any loan there is a risk involved if you miss payments. With a car loan, you are putting your car at risk. With a home equity loan, you are putting your home at risk.