Using Your Equity

Can you use a home equity loan to buy a car?

Couple at a desk considering a home equity loan to purchase a new car

Your household will see many cars come and go, and your home could be added funds to put you in your dream car.

If you’re wondering how to pay off a car loan, or secure funds to buy a car, look no further than the house where you and your family live. Your home is a key asset to help you finance large purchases and secure favorable interest rates. Home equity loans offer fixed, low interest rates and are largely based on your home’s value and equity.

Home equity loans are especially useful when you have a low credit score. Since the loan is secured by your home, you may be able to qualify with a lower FICO score.

How home equity loans work  

To make the right decision, you’ll need to compare your options and look for the pros and cons relative to your financial situation. Here are some of the key factors to consider with Discover® Home Loans:

  • Low, fixed rates. See the current rates here.
  • Terms of 10, 15, 20 or 30 years
  • Home equity loans from $35,000 - $300,000
  • No application, origination, or appraisal fees, and no cash is required at closing

How typical auto loans work

The typical auto loan offers:

  • A set interest rate that varies by lender
  • Shorter repayment schedule than most home equity loans

Different characteristics of each loan will be important to consider based on your specific situation. However, it is always worth noting if the auto loan you qualify for has a prepayment penalty. Depending on the size of your initial loan, these penalties can be significant.

Using home equity loans to pay off high-interest car loans 

The comparison between an auto loan and home equity loan should be made between the interest rate, fees, and terms.

If you have an older auto loan, you may have a loan with a higher interest rate than what today’s home equity loans offer.


The terms of a home equity loan are often a little easier on your budget, giving you a much longer term to repay the loan if you’re looking for a reduction in monthly costs. While this may raise the amount you pay over time, it can prevent you from dipping into savings or running up credit cards when you find it difficult to make your car payment.

See if a home equity loan can finance your car 

Talk to a financial advisor for help determining what rates are available to you and what you should know about choosing equity to pay off a car loan faster. One place to start is by considering the benefits that are unique to a home equity loan.

To learn if a home equity loan is right for you, talk to a Discover Personal Banker at 1-855-361-3435, or request a no-obligation quote online and we’ll call you back.

As you evaluate home equity loans vs. auto loans when financing your vehicle, consider the following benefits and risks.

Pros of using a home equity loan to purchase a vehicle

Longer term lengths

While most auto loans are spread out over 5- to 7-year terms, Discover’s home equity loans offer terms of 10, 15, 20, and 30 years. Longer term lengths may mean lower monthly payments.

Competitive interest rates

Discover’s home equity loans offer low, fixed rates that may be competitive with the average auto loan rates. See our current rates here. Lower interest rates could translate to lower interest charges over the life of the loan.

Lower monthly payments

The combination of a longer term length and a competitive interest rates should translate to lower monthly payments when using a home equity loan vs. an auto loan.

Cons of using a home equity loan to purchase a vehicle

Risk of foreclosure

Any home equity loan puts your home at risk for foreclosure if you cannot make payments. While you may find lower rates and monthly payments by using a home equity loan to purchase a car, be sure to understand this risk before committing.

Terms outlive your vehicle

Even a 10-year home equity loan will likely require payments longer than your car will last. And if you need to buy a new(er) car, you’ll have to continue making home equity loan payments as you look for financing options.

Higher Overall Interest Cost

Since your home equity loan term will be longer than a typical car loan, your total interest for the loan will more than the car loan.

Find your low,
fixed rate

Use our Rate Calculator to find the rate and monthly payment that fits your budget.


Start your application online

or give us a call.

  • Weekdays 8am–Midnight ET
  • Weekends 10am–6pm ET

Start your application online or give us a call.

  • Weekdays 8am–Midnight ET
  • Weekends 10am–6pm ET