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Auto Loan vs Home Equity Loan Calculator

A home equity loan is a type of second mortgage that allows you to borrow against the equity you’ve built up in your home over the many years of owning it. Once you take out a home equity loan, you can use your funds to pay for a variety of things, including a new car. 

When buying a car, you have options. So which one is right for you? An auto loan or a home equity loan? Let’s take a look at the differences between a home equity loan vs. car loan to help you find the best choice with the most savings.

Should I use a home equity loan instead of an auto loan?

Whether you use a home equity loan vs. an auto loan to purchase a car depends on many factors, including interest rates and your financial situation. While it’s true that home equity loans often come with lower interest rates than auto loans, you should determine whether you want to use your home or the car itself as collateral. With an auto loan, the car is the collateral. If you fail to repay the loan, your car can get repossessed. Conversely, if you use a home equity loan to purchase a vehicle, your home is the collateral. 

The right option for you between an auto loan vs. a home equity loan to purchase a vehicle depends largely on your financial situation.

Home Equity Loan vs. Car Loan Calculator

Our home equity loan vs. car loan calculator can help you build a better budget and determine which option gives you the most savings when purchasing a new or used vehicle. A few things to keep in mind are the collateral, interest rates, loan terms and loan amounts.

Apply For a Home Equity Loan Today!

How We Can Help You Afford a Car

When choosing between home equity loans vs. car loans, there are many important factors you should never overlook, such as interest rates and how long it will take you to repay your loan. We can help you find the best loan option for you, helping you purchase a new or used vehicle at competitive interest rates. 

Whether you need an auto equity loan based on your current vehicle’s value, a HELOC or an auto loan, we can help you discover your options and get the most savings. Apply for an auto loan online or visit us for financial counseling to help you find the best loan to purchase a vehicle based on your financial situation.

Frequently Asked Questions

Our home equity loan vs. car loan calculator can help you find the right option for you based on factors like purchase price, down payment and loan term and it takes into account the various interest rates of both options. You can also use this calculator to compare HELOC vs. car loans to help you find the right option.

Shared Loan Info

The shared loan info provides the auto loan vs. home equity loan calculator with information about what the two loan options have in common:

  • Purchase price: The purchase price is the amount you pay for the vehicle.
  • Down payment: The down payment is how much you put down upfront. The larger your down payment, the lower your loan amount, which can save you money over the life of both loan options.
  • Loan term (months): Loan terms are the length of time you have to pay back the loan.

Home Equity Loan

The next section gives the home equity loan vs. car loan calculator information about only the home equity loan:

  • Interest rate: All loans have interest rates, and home equity loans tend to have much lower interest rates than car loans.
  • Upfront costs: Your upfront costs are the costs to close on the home equity loan, which typically include loan origination fees. However, you’ll have significantly lower closing costs on your home equity loan than your original mortgage loan. If you’re wondering how much your home equity loan will cost you upfront, you can use our Closing Costs Calculator. Or, you can use our Mortgage Payment Calculator to estimate how much a home equity loan will cost you every month.

Vehicle Loan

The next section provides the calculator with information to compare both loan options.

  • Interest rate: Car loan interest rates tend to be higher than home loan interest rates because the collateral, the car, is worth much less than a home, so if you default on the loan, banks have to recoup their losses. Additionally, cars tend to depreciate in value over time, making them worth less as soon as they are driven off the lot.

Tax & Savings Rate

The tax and savings rate allows the calculator to estimate the better option for you based on your taxes and saved income.

  • Your state & federal tax rate: Your federal tax rates determine how much of your income goes toward paying taxes.
  • Your savings interest rate: The savings rate details how much of your income you save and earn on your savings.

A home equity loan is a second mortgage that allows you to tap into your home’s equity. Unlike your first mortgage, you can use the home equity loan for other things like paying off debts, paying for school or home improvements, making it a good option for individuals with a range of financial needs.

When comparing an auto loan vs. a home equity loan, you must consider what’s right for you based on several factors. Let’s take a look at a few of the differences between these loans to help you make the right decision for you.

  • Collateral: The collateral for a home equity loan is the house, while the collateral for an auto loan is the car. Even if a home equity loan can give you massive savings over an auto loan, some individuals don’t want to use their homes as collateral.
  • Interest rates: Interest rates are typically lower for mortgage loans because homes appreciate in value over time. Conversely, cars depreciate in value, so if you default on a loan, a lender may lose money trying to resell the vehicle. A higher interest rate mitigates their risk.
  • Loan amount: Typically, auto loans cover the cost of the vehicle and nothing else. However, home equity loans allow you to tap into your home’s existing equity, so loan amounts vary.
  • Loan terms: Car loan terms are much shorter than mortgage terms, typically lasting only a few years.
  • Tax implications: Interest paid on a home equity loan may be tax deductible, but interest paid on your auto loan is not.

Using a home equity loan to buy a car makes sense for individuals who have built up enough equity in their home and want to take advantage of a lower interest rate and longer loan terms. Here are a few pros and cons to ensure you choose the right option.


  • Tax benefits: If you use your home equity loan to buy, build, or improve your home, you can deduct it from your taxes. Since a home equity loan can be used for anything, you can use it to get tax deductions by improving your home and using what’s left over to purchase a vehicle.
  • Lower interest rates: Home loans have lower interest rates than auto loans because the collateral is worth much more and doesn’t typically depreciate in value over time.
  • Flexible repayment terms: Home equity loans have flexible terms that allow you to pay them off in smaller installments every month. If you only take out the amount you need to purchase a home, you can take advantage of a longer timeline and lower monthly payments.


  • Foreclosure risk: With a home equity loan used to purchase a vehicle, you run the risk of losing your home in the event you default since it serves as collateral.
  • Higher fees: Home equity loans come with higher fees like closing costs charged by lenders to originate and service the loan.
  • Longer repayment period: The longer repayment period means that you can save money on your monthly installment, but you won’t pay your vehicle off as quickly.

Have more questions?

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