Beware rolling the car loan into a mortgage

The lowest interest rate for borrowing money to buy a car will usually be through your home loan but financial planner from Roskow Independent Advisory, Matthew Ross, says only the most disciplined borrowers should consider this approach. Unless they have a plan to pay lots of extra repayments, you could be doubling the cost of your car.

”If you pay $35,000 off over five years, the amount of interest you'll pay on an 8 per cent fixed rate will be $8400. So a $35,000 car has cost you $43,400. [But] if you roll [the car loan] into your mortgage and take 25 years to pay it off, you'll pay $36,400 interest, so the car will end up costing you $71,400. You're doubling the cost of the car.”

Source: Sydney Morning Herald

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