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Do You Really Want to Finance Your Car for 30 Years?

By JLP | February 24, 2007

I was sitting here watching college basketball when a commercial for Countrywide Home Loan came. They were advertsing a “Combo Loan.” From their website:

Get ready for fantastic savings with a Combo Loan from Countrywide.

Want to get cash and simplify your bills? Refinance with a Combo Loan from Countrywide. Consolidate your first mortgage, your second mortgage, your car loan and all your credit cards into one easy loan with one low monthly payment. Less than perfect credit okay.

Three things stand out to me:

1. What’s the definition of “savings?”

I think too many companies try to equate lower monthly payments with “savings” and ignore the long-term costs. These loans aren’t cheap once you factor in the closing costs that are involved anytime you refinance.

2. Do you really want to finance your car (or your credit card debt) for 30 years?

I realize you can refinance for a shorter term. However, a lot of people won’t. Rather, they will look at the monthly payment and make their decision based on how it will impact their cash flow. That can be a big mistake.

3. If you have less than perfect credit, you probably won’t get a very good interest rate.

Loan companies don’t give away money. If your credit isn’t that great, you’ll be penalized with a higher rate. The higher your rate, the less advantageous it is to refinance.

One advantage to going this route would be the tax-deductibility of mortgage interest (credit cards and auto loans are not tax deductible), which will lower the cost of the loan. However, I don’t think it is enough to offset the long-term costs of carrying short-term debt over the long-term.

Topics: Budgeting, Credit Cards, Mortgages | 13 Comments »

13 Responses to “Do You Really Want to Finance Your Car for 30 Years?”

  1. » Links of the Week on Blueprint for Financial Prosperity Says:
    February 25th, 2007 at 9:31 am

    […] MBH has a two part review of Debt Is Slavery and in part 2, MBH asks Is money really not that important to you? On the debt front, JLP saw a commercial for a combo loan and wonders if you would really want to be taking out a 30 year car loan (which is the effect of rolling the debts into a combo). They’re really getting clever about getting people to pay more interest these days! […]

  2. JM Says:
    February 25th, 2007 at 5:43 pm

    I think if you can combine a car loan with a 30 year mortgage, then you can lower your interest payment. However, the best way is to still plan on paying your loan off early. 10$/month over 30 years can really make a big difference. Thanks for the good article and information.

  3. Mighty Bargain Hunter » Roundup for week of 18 February 2007 Says:
    February 26th, 2007 at 1:12 am

    […] All Financial Matters questions financing your car until it’s a classic. […]

  4. pal Says:
    June 7th, 2007 at 4:46 am

    If you are looking for refinance of your car or bad credit car loans, go through the site its amazing. For similar information click Bad Credit And Car Loan.

  5. Toon Says:
    December 2nd, 2007 at 9:51 pm

    Hi, the blog is very informative and useful for all..

  6. Tiffany Rodriguez-Taylor Says:
    March 3rd, 2008 at 9:39 pm

    I can’t imagine who would recommend that someone pay off their car loan with a home loan, if you do the math, it just doesn’t make dollars and Cents…

  7. Car Finance on The Finance World For News and Information Around The World On Finance » Blog Archive » Comment on Do You Really Want to Finance Your Car for 30 Years? by:… Says:
    March 9th, 2008 at 6:53 pm

    […] Comment on Do You Really Want to Finance Your Car for 30 Years? by:… I can’t imagine who would recommend that someone pay off their car loan with a home loan, if you do the math, it just doesn’t make dollars and […]

  8. car man Says:
    June 3rd, 2008 at 1:07 pm

    Used car are always better to buy especially when you taking about bad credit car loans. They are more affordable but more importantly a new car losses 15 to 20 percent of its value from the time it leaves the car lot

  9. earnest Says:
    June 4th, 2008 at 7:24 am

    3O years means that you will pay 3 times more for the car than the principle. You will be really upside down then

  10. Santh Says:
    July 10th, 2008 at 7:02 am

    This is by and large a matter of the individual’s income, credit status and of course whether he or she’s a home owner or not. Home owners with high incomes and excellent credit may be better off going for a longer term secured loan because of twin advantages of lower interest rate and tax deduction for interest payments.

    Home owners with poor credit status may have a tougher time deciding because the loan may come at a higher interest rate for them. They can compare the effective interest rate (considering the tax break) between a secured loan and a car finance and take a decision.

  11. khairul(bebas-hutang) Says:
    January 4th, 2009 at 11:26 am

    Regarding the effective interest rate, can anyone advise any link or website to calculate the EPR?

  12. Any Car Finance Says:
    June 10th, 2010 at 4:29 am

    it’s very nice blog

    Edmund smith

  13. jessica smith Says:
    August 19th, 2010 at 6:55 am

    save your money by good financing of car loans