Why don't you just put your down payment on one of your credit cards?

(Note: I'm not actually suggesting that you do this. Please read on.)

There are a few reasons why you wouldn't (or couldn't) do this:

1. The interest rates on the cards you have is very high.

2. You don't have enough of a credit limit on any one of your cards for the down payment.

These two reasons highlight the answer to your question.

Credit card companies charge very high interest rates. These high rates allow them to make money even when some of their customers default. They know that not everyone will pay them back, so they make sure to make a hefty profit on those who do.

Secondly, credit card limits are often much lower than the amounts of car and home loans. This limits the risk to the credit card company. Sure, you have $100,000 in total credit limit, but this is split among nine different companies.

When a bank offers a traditional loan for a large sum of money at relatively low interest, they need to be able to limit their risk somehow. They do this by ensuring that their customers actually have the ability to pay them back.

Why don't you just put your down payment on one of your credit cards?

(Note: I'm not actually suggesting that you do this. Please read on.)

There are a few reasons why you wouldn't (or couldn't) do this:

1. The interest rates on the cards you have are very high.

2. You don't have enough of a credit limit on any one of your cards for the down payment.

These two reasons highlight the answer to your question.

Credit card companies charge very high interest rates. These high rates allow them to make money even when some of their customers default. They know that not everyone will pay them back, so they make sure to make a hefty profit on those who do.

Secondly, credit card limits are often much lower than the amounts of car and home loans. This limits the risk to the credit card company. Sure, you have $100,000 in total credit limit, but this is split among nine different companies.

When a bank offers a traditional loan for a large sum of money at relatively low interest, they need to be able to limit their risk somehow. They do this by ensuring that their customers actually have the ability to pay them back.