By Steve Chin - June 2026 - 5 min read
At first glance, the answer seems obvious. Home loan rates sit around 6% while personal loan rates range from 8% to 14% or more depending on the lender and your credit profile. Secured car loans fall somewhere in between at around 7-9%. On rate alone, adding the cost to your mortgage wins every time.
But rate is only half the story. The other half is the term - how long you are paying it off. And this is where the picture changes dramatically.
Here is an example that illustrates the trap. You want to buy a $40,000 car.
Option A - Car loan: $40,000 at 8.5% over 5 years. Monthly repayment: $820. Total interest: $9,200. Total cost: $49,200.
Option B - Add to mortgage: $40,000 at 6% spread over the remaining 25 years of your home loan. Monthly repayment: $258. Total interest: $37,400. Total cost: $77,400.
The monthly repayment is much lower with the home loan option, which is why it feels attractive. But you pay $28,200 more in total interest. The car will be worth nothing long before you finish paying for it.
Using your home loan (or equity) makes financial sense when the money is going toward something that adds value to your property or holds its value over time:
A personal loan is often the better choice when:
If you own an investment property, the interest on your investment loan is tax-deductible. This changes the equation. Adding a car purchase to your owner-occupied home loan is not deductible, but if you restructured to draw from an investment line of credit for a legitimate investment purpose, the interest may be deductible. The rules around purpose and loan structure are strict, so talk to your accountant before making assumptions.
Lendology's approach: We look at the total cost, not just the monthly repayment. If using equity is the right call, we set it up on a separate split with a repayment plan to clear it in a sensible timeframe. Book a free chat and we will compare the options for you.
It depends on what you are buying and how quickly you want to pay it off. Using equity (adding to your mortgage) gives you a much lower interest rate - around 6% compared to 8-14% for a personal loan. But if you spread a $30,000 purchase over a 30-year home loan, you will pay far more in total interest than if you took a 5-year personal loan. The best approach is often to use equity but set up a separate split with higher repayments to pay it down in 5-7 years.
Technically yes, if you have enough equity. You can draw on your home equity at home loan rates to buy a car. But a car depreciates while your home appreciates - so you are using a long-term debt product to buy something that loses value. If you do go this route, set up a separate loan split and pay it down quickly rather than spreading it over 30 years. For many people, a standard car loan with a 5-year term is the more disciplined option.
On a rate-for-rate basis, a home loan is always cheaper because it is secured against your property. Home loan rates sit around 6% while personal loans range from 8% to 14% or more. However, total cost depends on the term. A $20,000 personal loan at 10% over 5 years costs about $5,500 in interest. The same amount added to a home loan at 6% but paid over 25 years costs about $18,600 in interest. The rate is lower but the term makes it more expensive overall.