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 Where to apply for the lowest auto loan rates
  Using a home equity loan instead of a used car loan
By the EchoBay Loans Expert
 Where to apply for the lowest auto loan rates
Dear EchoBay Expert: I realize there are many places to get an auto loan but I don't know who has the lowest auto loan rates. I have good credit and am looking to borrow about $21,000. Where should I apply?

Dear Loyal Reader: With good credit, you have a variety of options to choose from for your auto loan. You can usually find some of the best auto loan rates online. Because competition is so fierce and there is low overhead, they generally have lower rates, no application fees, no down payment required and offer interest rate locks.

In addition to that, you can be approved online in a matter of seconds and unlike traditional lenders, online lenders accept applications twenty-four hours a day, seven days a week.

Another option is a credit union. These lenders only make loans to their members and usually offer competitive rates. If you are a member, you should check out their auto loan rates as well.

The car dealer is another option but unless there are special rates through the manufacturer (i.e. 0% or 1.9% interest), these are usually not the best loan rates. The finance manager at the dealership earns his keep by charging higher interest rates.

You can also check with your bank. You can expect stricter standards, slightly higher rates than online, and a down payment of at least 10%. "Buy here, pay here" type lots are yet another option but you should prepare yourself to pay the highest interest rate allowed by law. It's not unlikely to end up with an 18-21% interest rate with these financers.

Finally, if you own your home, a home equity loan may be an option for you. By using the equity in your home, you can usually secure a good interest rate and the interest may be tax deductible. The only real downside to utilizing this option is that you put your home at risk if you can't make your payments.

The best thing you can do for yourself (and your wallet) is to shop around. Being knowledgeable about rates can help insure you get the best auto loan rate out there.

 Using a home equity loan instead of a used car loan
Dear EchoBay Expert: I don't want to pay the high costs of a used car loan from a bank or the car dealer where I'm going to buy a car from. Is it a good idea to take out a home equity loan, which has a lower interest rate, and use the loan money to purchase the car? The car costs $12,000. Thanks

Dear Loyal Reader: The answer to that question would depend on whether or not you are comfortable with putting your home up as collateral for the purchase of your used car. If you don't make the car payments on a used car loan, you lose your car; if you don' make the payments on your home equity loan, you lose your house.

That's not to say that using the equity in your home to save money on interest is a bad idea; it's just that you'd better be sure you can make your monthly payments without a problem so your home isn't put in jeopardy. If you have good credit, you may qualify for a low-interest used car loan, which would be the ideal situation.

If, however, you really need to purchase a vehicle and you don't qualify for a low-interest used car loan, the equity in your home can give you a helping hand. Just make sure that you pay off the loan as quickly as possible and don't miss a single payment. If you are able to manage your finances responsibly, a home equity loan can be a great way to finance your vehicle.

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Avg. National Rates
30 Yr Fixed 5.78%
15 Yr Fixed 5.39%
1 Yr ARM 4.80%
WSJ Prime 6.50%
Fed Funds 3.50%


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