Car loan to line of credit

[macdub]

Hi Guys,
just like your thoughts on this. I have a car loan which has high interest rate and I have portion on my mortgage as LOC.

Just wondering if its easy to increase the limit on LOC and and pay off the car and have it on LOC which has much low interest rate?

Can bank do the top up on LOC easily?

Thanks in advance

 

[Peter_Tersteeg]

The simple answer is yes, your LOC can be increased quite easily.

Make sure it's structured properly to ensure that you maintain tax deductibility on the LOC if you have used it for investment purposes so far (if the LOC has been or will be used for investment, set up a second LOC account for the car).

The LOC has a lower interest rate than the car loan and thus will save you money every repayment cycle. Make sure you use these repayments to pay off the LOC faster, or it will cost you a lot more. All you're potentially doing here is substituting a high interest rate short term debt for a low interest rate long term debt.

 

[Shahin_Afarin]

Make sure you don't cross contaminate the tax deductibility on the loans. Some lenders like St George and Macquarie allow you to create splits within the LOC or you can just go for a standard variable product.

 

[Aaron_C]

Yes can be easily done. Not recommended if you are running a business though.