Apply for a home equity line of credit, or HELOC, can help you pay for both anticipated and unexpected expenses. We’ve noticed that there’s some confusion about how to use a HELOC.
Most of the misunderstandings about HELOCs some from the name. Your home equity – the difference between your mortgage balance and the value of your home – serves as the collateral for the line of credit. In most cases, you’ll have discretion in how you use the money.
To give you an idea of how getting a HELOC can help you financially, here are 6 ways to use a HELOC.
#1: To Make Necessary Home Repairs and Improvements
The first option you have is to use your HELOC to make necessary repairs or desired improvements on your home. These improvements can add to your home’s value and can help you turn a profit when you sell your home.
Some examples of what you can do include:
1. Building an extension to your home
2. Improving your home’s curb appeal with painting and landscaping
3. Upgrading your HVAC or plumbing systems
4. Buying new appliances
5. Painting and refinishing the interior surfaces of your home
6. Redoing a kitchen or bathroom
Many homeowners prefer HELOCs to second mortgages because they’re revolving lines of credit and you’ll borrow only what you need.
#2: Pay Educational Expenses
College tuitions have increased at a rate that far outstrips the cost of living, putting educational expenses out of reach for some families. You can use your HELOC to pay your child’s tuition and other college expenses.
Even if your child qualifies for scholarships and financial aid, there are expenses that these awards won’t cover, including:
1. Computers, printers, & other electronics
Many parents want to minimize the amount of their child’s student loans. A HELOC can help you do that.
#3: Buy a New Car
Buying a new car is a big expense and one that can put a serious dent in your savings. Instead of depleting your nest egg, why not use your HELOC to buy a new car?
A HELOC can be used to buy any vehicle, but it may be especially advantageous if you’ve got your eye on a luxury car. It’s common for interest rates to be higher for luxury vehicles than for standard ones, and if you can get a HELOC with an affordable interest rate, you might be able to save quite a bit of money.
Of course, you may also want to consider using a HELOC to buy a car for one of your children or even a recreational vehicle like a boat or ATV.
#4: Take a Vacation
Let’s face it, vacations are expensive, and it can be difficult for families to afford to get away if they need to take money out of their savings or put the vacation-related expenses on a credit card.
In many cases, the interest rates on HELOCs are lower than those on traditional credit cards. If you want to take the kids to Disney World or splurge on a second honeymoon trip to Paris or Hawaii, your HELOC is there to provide the funds you need.
#5: Consolidate Debt
What happens if you’ve got debt with several lenders and you’re having a hard time keeping up with the payments? One option is to use your HELOC to consolidate your debt and save money on interest rates.
A lot of people who apply for HELOCs do it because they want to simplify their lives. Instead of making monthly credit card and car payments, they use a HELOC to pay off other debtors, stop high interest payments, and save money.
#6: Start a Business
If you’ve dreamed of starting a business but lack the capital to get it going, a HELOC can give you the funds you need even if you can’t qualify for a business line of credit.
Whether you need to rent an office space, invest in inventory, or hire a marketing expert to help you get your new company off the ground, you can use your HELOC to ensure you have the money to reach your goals and make your business a success.
In addition to the 6 things we’ve mentioned here, you can also use a HELOC to create an emergency fund, pay for a special event like a wedding, or make a down payment on a vacation home.
To learn how we can help you get a HELOC, please click here now.