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Should I get a line of credit or a car loan?
I currently have a line of credit that allows me to withdraw money at 3.99%. This is lower than the car loan rate that I can find online of 5%. Should I get a line of credit to purchase a new car or a traditional car loan?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“If your line of credit has a cheaper loan rate than your
car loan
, it might be a better deal. It all depends on what your monthly budget is. Using a line of credit may have variable payments, but it could save you money on car insurance because of a loophole.
Lenders require full coverage for financed cars, but they won’t know you’re buying a car with your line of credit. This means you could get
liability coverage
instead of full coverage car insurance, which can save you money on your monthly premiums. That said, with a new car, it is a good idea to have higher coverage. Just because full coverage is more expensive than liability doesn’t mean you have to break the bank to pay for it. Try using the free
Jerry
app to make comparison shopping easy. Jerry compares quotes from the top 50 providers and delivers the best deals to your phone in minutes.You’re in a strange situation where your line of credit APR would be lower than a car loan. As such, you may as well take advantage of it.”
View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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