"I have the option of interest only payments with my line of credit."
While this is a flexible financing option, this can also be dangerous if not properly budgeted and managed. Many banks report a majority of line of credits are never repaid or take 10 or more years for repayment! Life can get easily get in the way of making payments which will cause you to pay more in the long run in interest than you would with a fixed vehicle loan.
"Banks require 2-3% as a minimum payment on unsecured line of credits."
At 3% a $20,000 loan would work out to be 600/mo. vs a $20,000 dealer finance loan over 60% mo. at 7.99% which is only $450/mo.
"Some say I can get a lower floating interest rate."
A line of credit will be around prime if it is secured with your home. Floating interest rates fluctuate up and down with prime. How long will it take you to pay off if you use it? What do banks say about time? If you keep adding to you line of credit principal you may never pay off your vehicle. You also likely will have to pay off your vehicle if you decide to sell your home as well.
In most cases it is less expensive to pay a steady stream of affordable payments versus using your line of credit.
"I'm comfortable with my bank."
We work and partner with major banks and credit unions. They give us authorization to represent them and to work with them to provide you with financing at the bank of your choice.
We do business by the same laws and guidelines that your bank adheres to. We will explain all our terms, including Penalty-Free Early Payouts, Amortizations, Fixed and Variable interest rates and everything else you need to know. This is all done quickly and confidentially.
"It's secured, I feel safer with my line of credit."
If the bank sees any increase in risk to security, they can demand full payment at any time. For example, value of equity, job security, death or bankruptcy can be reasons for repayment. Your dealer finance loan is a dedicated loan, this means only the vehicle can be used as security. Your home and other assets are safe!
"Why would the bank offer me a line of credit if I wasn't meant to use it?"
Lines of credit can be a good thing, if they are used for what they are intended for. But many lines of credit are eventually paid out using consolidation loans at a much higher interest rate. People see after months of low or zero pay down that a conventional loan is necessary to lighten their debt load. Lines of credit can make it too easy to get "buried."
Most banks do not even recommend that you use your line of credit on vehicles loans.