A lot of people
fall into the mistake of using their Line Of Credit to purchase or lease a
vehicle not knowing that a line of credit has a floating interest rate that
fluctuates with the bank rate (variable interest rates always) while a customer
using loans especially designed to purchase or lease vehicles has the
opportunity to choose from variable or fixed interest rates.
Another thing
that most people don’t know about their line of credit that banks consider line
of credit a second mortgage secured and registered against property or home.
Default of payment for any reason allows the bank to take their home
(Foreclosure).
It is always one
of bank’s rights to withdraw money from customer’s accounts to pay for their
line of credit without notice and if the bank sees any increase in risk to the
security of line of credit, they can demand full payment of the amount owed on
line of credit.
Also terms of
repayment using line of credit are not designed to automotive purchases due to
the vehicle’s price depreciation factor as well as the enlarged term of the
loan (registered against the property and the line of credit).
Customers using
line of credit to pay for a vehicle might bear legal fees to discharge the
second mortgage from property title while a vehicle loan would be paid in full
and lien released with no fees associated (responsibility for release borne by
financial institution).
Now
you know why it is a bad idea to pay for a vehicle using line of credit!
