Financing an engine

The time has come to purchase -- or at least order -- an engine for the RV-7A. I'm going with Mattituck, mostly on the strength of reputation for quality and customer service. I'll bet 90% of each decision I've made on the plane up until now has been on the basis of recommendations and experiences of other builders. Are you listening, U.S. businesses trying to compete: customer service and quality!

That said, I thought I'd finance the engine -- up to now the project has been pay-as-you-go but buying a car for my youngest son years ago made writing a check for an engine unlikely -- through Airfleet Capital. Other builders have recommended it.

But get these terms: For a loan over $25,000, they want 20% down and a 5-year term at a fixed 12% rate. For a loan under $25,000 they want 20% down and a 7-year term at a 10% fixed rate.

Now, why would I want to do that?

For the first scenario, that would require a monthly payment of $566 with a total financed of $33,367. The second scenario yields a $415 monthly payment for a total amount financed of $34,863. Better, but I'd still be paying a ton of interest.

I've been reluctant to use a home equity loan but since the line of credit I now have on my home equity is down to a zero balance, I have to consider it. The last time I checked the interest rate on that was about 7.5% (and I'm sure I can get a lower rate if I call).

Using the home equity, the first scenario would require $501 a month and the second $383. And, of course, I wouldn't be required to put money down. Plus, it might be possible to deduct the interest on my taxes (if I pretend the loan is going toward home improvement. At my current tax rate, I figure that lowers the actual monthly expense by about $30.