Apr 01, 2019 / Home Equity
A home equity line of credit is a versatile loan that can be used for just about anything. But because it involves borrowing money against your home’s equity, there are a few preferred ways to use your HELOC. Here are 4 wise ways to use your home equity line of credit.
As a general rule, it’s wise to use a HELOC in ways that will build wealth. And because you’re borrowing against your home’s equity, it makes sense to use the money to invest in upgrades that will increase the value of your home. Often, you can recoup all the money you put into your home through a higher resale or rental price or a better market value.
Home equity lines of credit come with an interest rate that’s usually much lower than other traditional types of credit. If you have a credit card with a high balance and a high interest rate, moving it over to a HELOC can make a lot of sense. Remember, that you’ll be moving an unsecured credit card loan over to a secured loan. But as long as you were planning to pay off the loan anyway, you might as well save money with lower interest payments.
If you’re tired of fighting debt on multiple fronts, consolidating your debt into a single monthly payment with a single lender can make life a lot easier. A home equity line of credit is a good way to consolidate because it usually has a lower interest rate than other types of loans. And because your home equity loan will have defined withdrawal and repayment periods, you can plan out your payments and have a clear payoff date in mind where you can be debt free. Some HELOCs even have a feature where you can lock in an interest rate at any time to reduce the risk of your payments increasing.
Speaking of building wealth, there might not be a better way to build wealth than by investing in yourself or your kids’ future. Higher education is expensive. And if you don’t qualify for or don’t want to go the route of sometimes-expensive student loans, using the equity in your home to pay for kids’ (or your own) college expenses is a great option. Again, you should always compare interest rates of other loan options and weigh the advantages and disadvantages of using a secured and unsecured loan. But a HELOC offers a flexible repayment period and a historically good interest rate for tuition and student expenses.
If you’ve been holding off on home improvements, debt consolidation, paying off high interest credit cards or even higher education, a HELOC can help you accomplish your personal and financial goals. If you’re ready to talk HELOC, visit Utah First online or stop by a branch location to learn more.