With loan rates so low, you may be considering taking advantage of the competitive interest rates to tap into the equity in your home. With a home equity loan or HELOC (Home Equity Line of Credit), you use your home as collateral for the loan. Because the loan is secured by your property’s value, the rate is usually much better than an unsecured loan or credit card. While a home equity loan can be used for anything, there are certain expenses that make the most sense. Here are some of the best uses for your home equity.
1 Debt Consolidation
According to online news reports, the average national credit card rate in the first week of March was 16.17%. That’s a lot higher than the average rate of a fixed rate home equity loan or HELOC. Using a home equity loan to pay off high-rate credit card debt and other high-interest loans can be a very smart move financially. A lower interest rate means a lower monthly payment. It may also enable you to pay off multiple credit cards and other debt at one time, simplifying your life and your budget. It can be an effective way to consolidate and save a significant amount in interest over time.
2 Home Improvement Projects
Home equity can be the perfect way to finance a home improvement project or remodel. After all, you are using your home’s equity to improve your property and hopefully boost the value of your home. This is especially true if you can secure a low-rate home equity loan or HELOC to complete the project.
Investing in your home is always a smart idea. If you’re looking to sell, it can increase the value. If you plan on staying put, it can help turn your space into the home of your dreams for a lifetime. The structured payments of a home equity loan make it an easier way to budget for home improvement projects. Home remodels that can help increase the value of your home include kitchen and bath remodels, carpet and hardwood flooring replacement, finishing a basement, and exterior and landscape upgrades, among others.
3 Down Payment on an Investment Property or New Business Start-Up
Using a home equity loan rather than draining your savings to purchase an investment property or to start a business can be one of the best uses for home equity. A home equity loan enables you to access a lump sum of cash at a competitive interest rate and might be more cost-effective than a high-interest rate business loan. A home equity loan can help you increase your down payment on a property, potentially lowering your monthly payment. It can also provide you with the funds needed to get a business off the ground. It’s an affordable solution for many borrowers. Check out the competitive home equity rates at Benchmark FCU if this sounds like the answer for you.
4 Pay Emergency Expenses
If you haven’t planned ahead for a rainy day, a HELOC can be extremely handy for emergency expenses. A home equity line of credit enables you to borrow as you need the money and only pay interest on the amount you have drawn on the line. It can be a fast and efficient way to pay for unexpected emergencies as they arise. Benchmark FCUs Ultimate HELOC can be a helpful tool when faced with a sudden expense. It pays to plan ahead.
5 Pay Tuition
A home equity loan or HELOC is often used as an alternative to student loans, personal loans, or credit cards in helping to pay tuition and other educational expenses. Whether you’re looking to pay for your child’s college education or go back for the training needed for a career change, a low-rate home equity loan or HELOC can help you achieve your goals.
Consider the best uses of home equity before borrowing
A home equity loan can provide you with a low-interest way to tap into your home’s equity and fund projects, pay expenses, or even act as an emergency fund. The biggest disadvantage to a home equity loan is the overall risk. Your home is used as collateral for the loan. When used carefully, a home equity loan or HELOC can provide homeowners with a unique advantage when certain borrowing needs arise.