A line of credit is a convenient, and simple way of borrowing money. They are often granted without much hassle, and can often be applied for online! What your bank isn’t telling you, is that lines of credit have their own disadvantage, especially when it comes to automotive purchases. It’s best to understand the fine print before deciding to spend that cash on something like your new or used vehicle.
Lines of credit can be a great tool to use for emergency situations if your bank account isn’t quite reflective of the money you need. They could be useful for unexpected expenses, like a costly house repair, or large renovation but lines of credit often aren’t the best solution for car purchases. Here are our top 6 reasons why you shouldn’t use your line of credit to purchase a vehicle:
Floating interest rate that fluctuates with Prime.
Everyone wants to know their interest and terms, right? When it comes to your line of credit, floating interest rates can result in variable payments. If you want a steady and secure vehicle payment, we’d suggest sticking with dealership financing.
2. The bank has the right to withdraw money from your account to pay for your line of credit.
All payment withdrawal dates are pre-determined here at Ajax Hyundai when you finance a vehicle with us! By paying your vehicle payments on time, you can feel comfortable and ensure payment stability that keeps your bank account at ease.
3. Secured Lines of Credit are secured by your home.
That means any default of payment, for any reason at all, allows the bank to take your home.
4. A line of credit is a re-branded second mortgage.
Since many lines of credit are usually secured by your home, that means you owe more than your mortgage. If you purchase a vehicle using a line of credit, and unable to make a payment for any reason you will be eligible to lose more than just your vehicle.
5. Any perceived increase in risk to the security and the bank can demand full payment.
Your bank has the right to demand payment in full at their discretion at any time, with or without cause. If you do not have the cash to pay off your line of credit they can and will use their “Right to Offset”.
6. Terms and conditions of a Line of Credit are not designed for automotive purchases due to the depreciation factor.
You shouldn’t pay more than you have to. Automotive specific financing can be found at your local dealership, and better reflect the value of your purchase.
Just remember, there are many options when it comes to financing your vehicle at Ajax Hyundai. We offer competitive interest rates that will often be better than your personal line of credit, and we work with your banking institution.
Ask how our on-site Financial Service Managers can save you some money when financing or leasing your vehicle. Use the form below or give us a call!