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Paying of debt with HELOC

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Tommy42
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Paying of debt with HELOC  Reply with quote  

Hello. I currently have an open HELOC with a very low interest rate and zero balance. I was toying with the idea of paying off our cars as the HELOC rate is lower than the car loans. We owe around $20k between both cars. I was going to use the savings from the car payments to up our 401k contributions and make additional principle payments on our first mortgage. Any thoughts? Thanks in advance
Post Wed Sep 19, 2012 8:31 pm
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coaster
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The only drawback is that you're collateralizing a depreciating asset (your vehicle) with your home. In other words, should hard times come upon you, you can default on a vehicle loan and only lose the vehicle. You convert the debt on the vehicle into debt on your home and you could lose the home.

It's probably a pretty small risk to take, but it does increase your risk somewhat. If you're comfortable with the increased risk on your home, then numbers-wise it's a gainer.

~Tim~
Post Wed Sep 19, 2012 9:26 pm
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Tommy42
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Thanks for your thoughts. I'm aware of the increased exposure, but we have 50% equity in our home so the risk is minimal from that standpoint. Considering I can get our home paid off in close to half the time remaining, I think it's worth it. Thanks again
Post Wed Sep 19, 2012 11:46 pm
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coaster
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Go for it. Wink

~Tim~
Post Thu Sep 20, 2012 6:21 am
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