HELOC's are usually setup as revolving interest, like a credit card, or may be set up as a non-convertable balloon payment. They will likely be setup on 10 or 15 years. In a balloon, you pay interest only until the date of maturity and then it has to be paid off. Either by you, or by another loan. Better be sure of your ability to payoff or borrow several years down the road if you don't pay it off on your own. It takes a bit of will to make yourself pay good, regular payments on it. You don't have a payoff date for the car, since it's up to you to do it. It would probably be tax deductible, and the rate should be low, like you said. Doesn't mean you'll save money though if you don't maintain a self-imposed payment schedule to pay if off as fast or faster than you would have otherwise. That's the kicker. With your installment loan, you make payments without thinking about it. On the HELOC, you're on your own to make sure you keep youself where you need to be on the loan.
A HELOC can affect you in a couple of ways, off the top of my head:
1- You may find that you cannot refinance your home, afterwards, if your combined loan-to-value is too high, even if you are subordinating the HELOC to the new loan. This will vary with lenders, but there is a lower cap on a loan like that than if you didn't have a 2nd lien. Also, in calculating Combined Loan To Value (CLTV), the figure used for your HELOC is your ability to borrow, not just the balance. If you have a $1000 balance, but your line of credit is $50,000 the $50k is used. It varies with lenders, but can be an ugly surprise. This is a fairly new development (earlier this year). A HELOC is a 2nd lien on the house, don't doubt that.
2- If you plan on selling your house in the future, the money you used to pay off your car, if the HELOC isn't paid off, is money you aren't making on the sale of your home, since it has to be paid off when you sell. You may find yourself in an "upside down" situation when you take into account the closing costs you're paying for the buyer, realtor commission (~6%, or so, normally), your 2 payoff's etc. Just stay on top of the figures and think about where you might be in 10 years.
Not trying to discourage you, just throwing out some thoughts. Banks around here are doing them for free, even paying for an appraisal. Shop around, always the thing to do.
Maybe some others will chime in with their experiences with them.
