Smart Ways to Use a HELOC

Services | 05/10/24

As a homeowner, you may have heard about the benefits of taking out a Home Equity Line of Credit (HELOC) or a Home Equity Loan to access the equity you have built in your property. These loans can offer a lower interest rate and easier eligibility requirements compared to other types of loans. You can leverage your home equity to pay for a variety of expenses, but some use cases are wiser than others.

First off, it’s important to note that like all debt, both HELOCs and Home Equity Loans are serious financial instruments. You should have a reason for them and a plan for paying them off. If you fail to pay your loan back, you can face severe consequences ranging from damaging your credit to losing your house, all while still being liable for the balance of the loan.

With that in mind, let’s look at a few intelligent ways you could use your home equity to improve your life and financial well-being.

Financing home improvement.
This is the most common reason given for using a Home Equity Loan or HELOC. Improvements to your home typically increase its value, so many see home improvements as a low-risk investment. Using the equity that’s in your home to finance these improvements is the cheapest way to increase the value of your holding.

Debt consolidation.
If you have a lot of “bad” debt, like credit cards, car payments, or other high-interest loans, you may be able to save money each month by paying off that debt with a HELOC or Home Equity Loan. They will most likely have a lower interest rate, and you’ll only have to make one payment each month. Click here to learn more about debt consolidation.

Purchasing a car.
Unlike your home, your car is almost certainly going to depreciate in value. Most likely, the interest rates on auto loans will be higher than those on a HELOC or Home Equity Loan. You can also get a lower price overall by buying the car outright, which may allow you to work around financing fees from the dealer. Click here for more tips when it comes to purchasing a car.

Covering emergency expenses.
Most financial experts recommend having an emergency fund that could cover anywhere from three months to a year of expenses. If you don’t have the cash on hand, though, you can use home equity lending to cover medical expenses, car repairs and other unexpected costs. You should still work to build savings that can prevent borrowing in the event of a catastrophe, but opening a HELOC or Home Equity Loan can provide you with some security in the meantime. For more tips on how to build an emergency fund, click here.

As you can see, Home Equity Loans and HELOCs are valuable financial tools you can use to improve your life and well-being. If you own your home and are considering any of the above plans, click here to apply online or schedule an appointment to meet with an Ascend loan specialist. Don’t wait until you’ve got a giant bill for remodeling or an expense you can’t cover; speak to a representative about home equity lending today!

Suggested Stories