How it works
You take out a home equity loan and use part or all of it to pay off your auto lender. Once the car loan is paid, the lender releases its lien and you hold the title free and clear. From then on, you make one payment on the home equity loan instead.
CapCenter home equity loans start at $50,000, so this approach usually makes the most sense when you're paying off more than one vehicle or combining car debt with other balances.
The term matters as much as the rate
A car loan is often paid off in a few years. A home equity loan can run 15, 20 or 30 years. Even at a lower rate, spreading car debt across decades can mean paying more interest in total.
Before you decide, compare the total interest left on your car loans with the total interest on the new loan, not just the monthly payment.
Your car keeps losing value
Cars usually lose value each year you own them. If you move a car loan into your mortgage debt, you may still be paying for that car long after you've sold it or traded it in.
The risk is stacking. If you buy your next car with a new auto loan while the old one lives on in your home equity loan, you're carrying two car payments.
When it can make sense
- Your auto loans carry high rates, perhaps from when your credit was weaker
- You're paying off several vehicles or combining car debt with other high-cost balances
- You plan to keep the vehicles for years
- You'll choose a shorter term or pay extra to clear the balance quickly
When to leave the car loan alone
- You have a low promotional rate from the dealer or manufacturer
- The loan is nearly paid off
- You plan to trade in or sell the car soon
- Your income is uneven and a missed payment would put your home at risk
Steps before you apply
- Ask each auto lender for a payoff amount and your remaining interest
- Check how much equity you have and what you'd need to borrow
- Pick a term that clears the debt in a time frame you're comfortable with
- Set aside money for your next vehicle so you don't start a new car loan