5 Ways to Use a Home Equity Line of Credit
If you’ve been thinking about making upgrades to your home or making a big purchase, you may have looked into a home equity line of credit (HELOC). A HELOC is a revolving credit line that is secured by your home. You’ll be able to use your home’s equity and then only pay back what you borrow through monthly payments.
There are many ways to use a HELOC. Below, we’ll outline some of the best ways to put your home’s equity to work for you.
- Home Improvements Of course, one of the most common uses of a HELOC is to make home improvements. Updating a kitchen or bathroom, building a new deck or patio, or adding an addition are all large projects that will also improve the value of your home. Making costly repairs like replacing the roof or installing a new air conditioner are also common uses of the funds from a home equity line of credit.
- Debt Consolidation A HELOC is useful if you’re looking to pay down debt. High-interest credit cards and other small loans can be combined into a HELOC, allowing you to have just one payment. By combining your high-interest debts and locking into a lower interest rate, you can save interest and pay off your debts more quickly.
- College Costs If your kids are heading to college, or you’re going back to school, a HELOC can be a good option to cover tuition costs. By borrowing the money through your HELOC, you can make the tuition payments as they come and pay off the debt during the repayment period for your line of credit. Make sure this is the right option for you by comparing HELOC rates and student loan interest rates.
- Unexpected Expenses It’s recommended that you have an emergency savings of three to six months’ worth of expenses. But if your emergency fund is lacking, or you’re hit with job changes or large expenses like medical bills, a HELOC could help you stay afloat financially. You can open a HELOC and have the funds there for when you need it without having to make any payments until you borrow the money.
- Vacations or Weddings If you’ve been saving as much as possible but need a little boost to help cover your dream vacation or wedding, a HELOC may be the solution. A HELOC may be a good option because of the lower interest rates. If you’re financing a big trip or the perfect wedding, you could end up saving money on interest by choosing a HELOC instead of a credit card with higher interest rates.
A home equity line of credit can be used in many ways and offers low rates and affordable monthly payments.
Opening a HELOC is a big financial commitment. Make sure you’ll be able to handle the payments and be able to pay them on time. The collateral for your home equity line of credit is your home, so it’s important to consider all your options before moving forward.