which one should i pay off first $50,000 car loan @ 0% for 6 years, or home eq. for the same amount, @7.5%?

Answer 1

People are not going to like this answer. The car loan. You can't deduct it. Do the math for yourself. The car is an "expendable" item; it depreciates and your home appreciates. After 6 years it's not going to be around. The avg. person (like you and I) buy a new car about every 3 to 4 years. If you trade the car you're going to take a "Hit" on the value at any dealership (more loss), and it's not deductable.

The car w/ a zero interest was probably a 20% down. So you have a $60,000 car that's going to be worth half that in 4 years; maybe less. I can give you the mathmatical formula showing you why this is a smart move, but it's not going to convince you. You'll have to work this out for yourself. Once the car is paid off, then work on the house payment(s) with the additional money that you used on the car payment. In the mean time you get the interest deducted from your taxes for the home loan. That means you accelerate the car payment, and keep the car an additional year. The home equity line is for 15 years? That's avg. Your car payment is 694.45 per month. After you trade the car, with what it's worth to trade, it will make your car payments go down by half. (Excluding inflation). The rest goes to the house payment.

Answer 2

1

Answer 3

It is hard to imagine taking on so much debt at any given time. I would put all plans on hold, use the home equity loan to pay the car note, then once the home equity loan is paid you will not have to worry about any interest rates or any outstanding debt.

Then take the payments you have been making, put the money into a money market savings each month and after a year or two, you will not need any loans.

If you can not pay a substantial amount of the car note w/i that time frame then be aware of impending interest charges. See where you are on the home equity half way through, depending on the interest rate on the car note after the promo, you may want to start paying on both for the last 2-3 yrs.

Answer 4

Did you already buy the car ?

A 0% rate is usually prepaid interest in the price.
With these offers, you can usually get a much lower price for cash payment, in which case it makes sense to buy the car at the discounted price for cash.

The person who said pay off the 0% car loan now is nuts.
Their logic is completely flawed. Beyond foolish.

If you already have bought the car, pay as much down on your equity line as possible. You shouldn't have any other liquid funds. If you have a separate savings account, pay down your line with it.
You aren't getting 7.50% on your savings.

Because equity lines are based on daily average balance, you should put ALL liquid money into your equity line, including your paycheck, and not pay the payment until the last day of the grace period, even if you have to pay the payment with a check from the equity line.

Also pay any other bills in the same manner. As late as possible without paying a late charge.
The average daily balance of your HELOC will drop.

To those who think it makes sense to pay down 0% instead of 7.50%, I hope that you aren't a financial advisor.
With the paid down amount on your equity line, you will have the funds available to make a decision about the car when you are ready.

Answer 5

The car loan is really zero percent? Nice! Don't be in a hurry to pay that off, pay off the other one first, and just keep payments current on the car loan.

Getting a tax deduction for the home equity loan's interest will only save you a small percentage of the interest you pay, so there's no point in keeping that just for the deduction.

Answer 6

Home Equity because the Interest Rate is greater than the Car Loan

Answer 7

The car loan, why pay interest if you don't have to. The tax deduction won't make up for what you pay in interest. Both loans will be classified as good debt in regards to your credit score because both are fix term loans.

Hope that helps.

Answer 8

I would say home equity and don't forget to negotiate interest rate if you paying everything off.

gdz,
Global Investors Community. Making Money Instructions
http://www.moneyhowto.com

Answer 9

Unless you want the tax deduction for the home equity loan, get rid of that first.