Borrowing on the Mortgage versus specialised Car Finance
The temptation with borrowing on the mortgage is keeping the repayments low, by extending the term over which the loan is repaid.
It costs less each week, but in the end, this can end up costing a lot more.
It's sensible to pay your House over a longer term, since its an appreciating Asset that grows in value.
However, your Car (however much you love it) is a depreciating liability, which generally reduces in value. It can therefore make more sense to pay this off more quickly under a dedicated car loan.
Cost of $10,000 loan |
Mortgage
7% over 25 years |
Finance
13.9% over 4 years |
|
Total Interest over life of Loan
Savings using Finance option ... |
$11,204
|
$3,092
Save $8,112
or 72% |
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