I just crunched some numbers, and it's very scary. A 2k6 6-spd with elite, navi, splash blah blah blah goes for about invoice (Nissan is only giving $750 rebate as I type), which is almost 32k. If you buy the car using a home equity loan, assuming prime -.75 or 5.75, the payment is $154/mo. Not only that, the $154/mo. is tax-deductible. Why? Because the above scenario is with a LOC, secured by your home. And the $154 represents interest only; at the end of your draw period you will have zero paid towards principal. I think it's a house of cards and why everyone is living so well despite tough economic conditions (except real estate). And it was interesting when I talked to some midtown bankers last weekend at a wedding, he said their risk is nil as they resell the loans as soon as they close. Wow.......guess I can afford a Porsche after-all!!

 

Don't know much about home equity but $154/mo, just paying back the principle - not counting interest, that's 32k/154/12 = 17 years. Or am I missing something? Interest only loan? Either way, 32k is coming from your pocket, eventually.

I also doubt that using it for a vehicle is tax deductible.

 

there are benefits of getting a car loan through refinancing, but there is no way that your payment on 32K car will be THAT low..or thats 154/mo for 30 yrs..you'll be able to deduct the interest, but still, you're responsible for principle. If you invest that 32K in the market right now and get an 8-10% per year interest, or use the 32K towards a downpayment on a rental property, you'll be better off.

 

I'm not understanding the point of this post. Just because you can doesn't mean you should. Of course your payments will be lower the longer you stretch out the loan period. Any moron could figure that out.

 

YES..... YES .....YES TXT 1 you're right...

 

Yes, I can see that you don't understand, as you probably don't own a home. The way that the LOC works is that you don't pay anything towards the principal, or at least you are not required to, during the draw period. Then, when the draw has expired, you enter the repayment period. If a moron like me can get a LOC for that much, I mean where I could buy 3 Maximas tomorrow, could you imagine what a Harvard grad could get?

 

Actually, I own a home plus a few investment properties, but that is not the point. My point still stands. What exactly is your point? Don't do it? Thanks for that insightful financial advice.

Edit: To Frank Fontaine...I apologize for my tone in my posts. Perhaps I give people too much credit as far as their financial sense. I can see how someone could get drawn into a scheme like that focusing just on how low their payments would be etc.

 

There are plenty of people on this forum that could use a good warning when it comes to barely ethical finance schemes. Well, let me call a spade a spade. They are unethical (due to lack of full disclosure), and I hope there is a particularly hot place in hell for bankers who take advantage of people in this way. It is white collar crime.

 

I dont think I would feel comfortable paying on a loan and not hitting the interest. Ive worked with student loans and such and people will do it, but man does that suck. I dont even like the minimal payment on my credit card.

 

It is also a great way to flip a piece of property.

 

TXT you need to tone it down a little bit

 

Yea, you're one to talk buddy.

 

dont know if this is off topic but when I got my loan for my car the loan person advised me that I can refinance my car loan after 12-18 months I cant remember...How does this work? Thanks

 

All you do is you just take out a new loan after 12-18 months and stretch out the payments even further... its how you buy a car that you can't really afford.

 

That's exactly why I took out the LOC, but I'm a bit hesitant as I don't wanna go in when the music stops and they take one chair out of the picture. One of our friends bought two contels and a piece of land at Disney, and on paper they made out like bandits over the last 4 years. Problem is, even they're nervous about banking the gains (nearly 70% up--on paper, with the rents paying the mortgage [for the most part, a deficit here and there]).

By the way, those who keep say stretching it out further, you miss the point. You are talking about a conventional financing where you are paying principal and interest, and then you redo it in the same fashion. A LOC has a draw, and a repayment period, and is secured by the equity in your home. During the draw, min. pymt. = interest only.

My whole point in starting this thread was to exemplify how little our payments can be when we are doing interest only.

 

This is how most people are "buying" all these expensive cars right now, especially the H2's, Yukons, and Escalades. People are using their home equity as an ATM machine to buy a couple of SUVs, a boat, a few plasma TV's, and a couple of expensive vacations every year.

Let's assume you buy the car and keep it for 3 years. After 3 years let's say it's worth $15k.

$17k of depreciation / 36 = $472 + $154/mo

=$626/mo

Just doing the I/O on the car is still going to cost you a lot.

A HELOC usually has an adjustable interest rate. Watch your interest payment go up 50% once interest rates return to the 7-8% range. The only benefit I see to using a HELOC is being able to deducting the interest on your taxes. If you get the interest rate fixed and you pay enough principle to pay off the car in 4-5 years than it's almost a no brainer.

 

Hey, if any of you are in needs of A Home loan or liquid cash out in a few days and you own a home.. feel free to pm me and I'll get in touch with you or I'll give you my toll free work line..

 

Clark Howard says home equity loans are a no-no.

 

That is why I (as a financial advisor) recommend a refi and consolidate all your debt, pay off your car and that way you can save money, write off your interest and any points if there are any.. you can't write off the interest on cars or cc's debt..

anyways -- my .02

 

works as long as you can itemize (I assume you can) and don't use the credit cards anymore...if you're not disciplined then you may get into trouble...

 

Hey Frank
I too have been amazed at the more "exotic" forms of credit these days. My favorites are the no-interest mortgage and those that allow you to pay less than the required interest payment for the first five years - talk about digging yourself a hole!

 

Thats why a cringe at the thought of buying a new car - even if you get a near invoice price you get raped with depreciation and interest.

 

give me a call, im a jr. loan officer, and i could get you a free quote and explain how to get you a low fixed rate for an LOC, How much equity do you have in your house? and hows your credit? LOC'S tend to have lower payment per month comparing to a regular bank loan. 516 479 5777 ex 5737 Ask for Avi. Free quote, no cost, no obligations
FRANKLIN FIRST FINANCIAL

 

These exotic loans are nothing new. The last time they were around was in the 20's before the Great Depression. The single greatest cause of the Great Depression was excessive debt. There isn't so much a housing bubble as there is a debt bubble.

 

So, after the draw period then what? You still borrowed 32k that needs to be repaid. The only way to determine the benefit is to measure the true cost borrowing 32k. How much will you have paid back when its reached term. Not the amt paid each month. Its only $27/mo for 100yrs @ 0%. But when you add interest to that formula that $27.00/mo wont look so great. Even with a minor tax benefit.

 

I/O loans are great!!! After 3 years, your $32,000 car will be worth $15000, and you'll still owe $32,000 on it and have paid $5000 interest. Talk about being upside down on a loan!!!

Is it really appropriate to be advertising here? This post sounds like the spam mail I get.

 

Very good point, not to mention that the prime rate will soon go up 0.5%. I'm not sure that it's been announced (although the FED was at 2:15 pm), but my emigrant.com account went up to 4% today.

But I think you realize my point--we as Americans can live very richly in a material way. I know people in my office who let's be honest, there's no way they make more than a buck-twenty, yet drive an E55 and have a house north of 800k in Princeton? Got to have some of the above going on. But your advice is good--I owe $0 on my LOC, maybe I should keep it that way, unless I can flip a property, which could also be playing with fire today. I'm just being the devil's advocate.

 

So here's how you do it.. refinance, consolidate all your debt. Take out the cash need to get your car.. ok.. so your paying 5.99% for a 15-20 or 30 yr loan.. TWO advantages to it.. your paying down your debt with a nominal interest rate and you can write off the interest on this mortgage.. CANt do that on ur car loan.. #2, IF YOU are disciplined to pay extra to your debt.. then get the loan/mortgage that has the IO (interest only) option, that way you can pay just interest one month if bills are tight, if not, pay that extra to the principle and watch your next months IO payment lower since it will re adjust for the principle left that you owe since you contributed extra to your payment last month (only for Ameriquest loans). Definite way to pay off all your debt together faster, and be able to write off that god-damn interest that everyone charges for a loan : ... and get yourself that brand new max and hopefully keep your monthly expense the same, if not less..

If you have no debt, one mortgage and you can get yourself a 0 to 5% rate on your car loan, then don't call me.. unless you want to write off interest and not expand your monthly bills more than $155 a month for that new max..

Come to Ameriquest and I'll be glad to explain it all and help you out!

PS- we didn't become the largest private lending bank for no reason!

Ameriquest Mortgage Company is an Equal Housing Lender. Licensing

 

You begin by saying that peeps should take out a I/O HELOC so they can consolidate all their consumer debt and pay it off with a low interest rate and be able to deduct the interest.

THEN you say, go ahead, get the new max. It'll only increase your bills by $155 per month. If you want to pay off that max in 5 years with a 5% interest rate, you'll have to pay $603/mo. Even if you wanted to stretch that loan out to 10 years which would prolly be the life of the car, payments would be $339/mo.

There's three problems with these I/O loans.
1. People don't have the discipline to pay towards the principle. The debt never gets paid off

2. If the value of your home decreases and you need to sell, you're screwed because you can owe more than the house is worth.

3. After consolidating the debt, people go and run up the credit cards again.

All this debt is going to kill the economy and cause a severe recesssion. This economy is being driven by peeps buying SUV's, plasma TV's, and McMansions all while earning $30,000/yr. Once the US consumer is unable to service the debt he/she carries, they will have to stop spending which would then kill the US and global economy.

Recessions serve to kill of unproductive and worthless businesses and to cleanse the economy of the excesses (debt) from the boom.

 

I kind of follow you--the best option out of all that we've said is to not buy anything, i.e. drive that 95-99 Maxima because in reality, there is nothing wrong with it other than it's not in style anymore and lacks a lot of features that a new car would have.

My personal situation is that I put 20% down on a house about 4 years ago. I don't owe anything except the mortgage, yet by making one inquiry on the web, lenders are calling and emailing constantly because they want to tap that equity in the home and get me back down to 20% equity (it's shot up to around 48% in a mere 4 yrs). So I went with prime minus 3/4%, no fees ever (they had to attach riders to the standard contract--if you ever go for a LOC make sure you have riders stating NO FEES WHATSOEVER, FOR THE LIFE OF THE LOAN). I've seen paperwork where fees are waived for 24 mos. etc. and kick-in on the 25th mo. after activation, very shady.

The real lesson here is a 32k car is just that, a 32k car. Do you simply buy it just because you have (it's crazy) 6 or 7 or 8 times that equity built up in the home? imho the home is the long-term deal, you'll need it 37 years from now upon retirement, so you pretend you don't even have it, and then decide based on savings and your job whether you should really buy a new car. Heck, I've not even tied the knot yet but I realize that kids need $800/mo. saved to go to a state Univ. from the instant they're born to age 18, and that's with financial aid. Double that for an Ivy League school with financial aid.

I've seen some intelligent ideas kicked around on this thread.....

 

Just to clarify, I did NOT say take out an I/O loan UNLESS you are disciplined (few and far to find)..I was speaking of Standard and Conventional MTG's of 15-20 and 30 years and #2- you do not qualify for an I/O Loan at my Bank unless you have proven that you are disciplined in your credit history for the last 2 years (our bank is trying to protect from putting people in a bad situation where they can come after us later)..



Also, and about people buying things they cannot afford. Banks like ours do not let you take these loans unless you meet our guidelines of how much to DEBT to INCOME your actually putting your money to, and I mean ALL the debt you owe and how much you spend per month, we are NOT here to put people in a financial situation. If you take a 20 year loan, you will be paying off all that debt in that loan within 20 years and if you received that loan, we also know you make enough money to support yourself and you won't be in a financial situation where you can't make the monthly payments to go bankrupt or have your home foreclosed..

Also there is LTV, which is loan to value and then again, the consumer is protected by strict guidelines to keep themselves from taking to much money out unless they have phenominal credit history.. if not, and you are just 'debt racker' then you aren't going to get more than 70 or 80% of your home value.

Now in NJ, the last 4 years approximalty on average property Value is going up by 15% per year which is awesome because people who take out a loan @ 80% of there home's value will know that in a few years, the increase in the home's value will help decrease the percentage of debt owed against the home....
Personally, I'm not here to put people in Bad situations, I'm here to have happy customers who are able to comfortably get by and be in a better financial situation.

 

PS - Did predatory lending have anything to do with that success?
http://www.consumeraffairs.com/finance/ameriquest.html
http://news.minnesota.publicradio.or...datorylending/
http://www.innercitypress.org/ameriquest.html

 

Every Company thats large is going to have its flaws, I never stated to anybody that we were perfect. A bank doing 3 to 4 billions of dollars in loans a month is doing something right to get there. But you also got to think with thousands of employees there will be people that aren't perfect and out of the hundreds of thousands of people we deal with each month, there are going to be just people that are 'unpleasable' or just can't be made happy and will complain.. Becoming the Largest Private Lender in the US, we would not have made it this far after 30 years by doing any illegal practices (it would be all to easy for us to lose our license by the law if we were doing illegal practices since we are privatelt held), we are a large easy target now since our name is big and lots of people know us.. comes with the big name.

But all I know is I do right to my customers and I'm a proud employee of my company..
Check out the links below of other Large lenders with similar issues.. no one is perfect.. and if there is someone that's perfect, you tell me-

http://www.consumeraffairs.com/finan..._mortgage.html
http://www.consumeraffairs.com/finance/ba.htm
http://www.innercitypress.org/bofa.html

 

well i would suggest you get a 5year int only arm... or cofi loan stareting at 1%... correct me if ai wrong the HELOC is not FIXED... wheres as the arm IS for the first 3-7 years depending on the program you choose...

The COFI loan is the hottest selling loan in the market now

 

COFI is the hottest loan, but just be aware that it will build up your principle on what you owe the bank.... and that's also usually a I/O loan too.. not a bad loan if thats what you want..

There's a large selection of products and they can all be tailored to your goals.. I'm not going to go and bad mouth any of them because each one can have its own benefit depending on your situation.

 

well there is a way to get rid of that nasty little thing ( your principle goin up) you can make an extra payement at the end of the year...
i work for a mortgage company by the way.

 

TRue True.

 

Damn, is everyone a mortgage broker now?

 

Mortgage specialist/ financial advisor here.. no broker.. just working for one bank

 

I hate that word (broker). When I applied for my mortgage, that SOB tried to sneak 1/4 point into my deal. Like he thought I wouldn't notice an extra $900 in the good faith estimate. Then some dude in the gym told me he used to do it all the time, because people don't read things. I told him I was very surprised that banks would do stuff like that, and he corrected me--NOT banks, only mortgage brokers/mortgage cos. pull stunts like that. I also learned back then that the APR does take those shenanigans into account on a conventional mortgage. Not so on the LOC.....