For most of us our home is our most valuable asset. When a large financial need arises, you can make this asset work for you by securing a home equity loan or line of credit. There are several benefits of a home equity line of credit. For example, this type of loan gives you access to a lump sum of cash for big ticket expenses like home renovations, the purchase of a car or college education. In many cases, the interest is tax deductible.
Home equity loans and lines of credit offer you the flexibility you need to meet a variety of financial needs. If you have an ongoing project or are not entirely sure how much your project will require, you might apply for a home equity line of credit. You can access loan funds via check or a special debit card as the need arises. If the project expenses are more fixed you may choose a home equity loan, which makes available a one time lump sum that can be used for any of a number of expenses. Following are some of the most popular uses for your home equity loan.
Bill consolidation – credit card spending is on the rise. In fact, in recent years spending has outpaced saving and the average American carries nearly $10,000 in credit card debt. Using a home equity loan to bring your credit cards to a zero balance can save you thousands of dollars, especially when you consider how much interest you might accrue paying only the minimum on high balances each month. If you choose a home equity loan to pay off your credit cards be very careful to then use cash for most or all of your expenses. If not, you might find yourself with the burden of paying new credit card debts in addition to loan payments. Don’t forget a home equity loan is secured by your home. If you fail to repay the loan as agreed you run the risk of foreclosure.
Education – Most parents want to help their children meet educational expenses, but let’s face it, with so many other expenses it can be tough. A home equity loan or line of credit gives you access to the money you need to help your with tuition and other educational expenses.
Renovation or remodeling projects – Your home is probably your greatest investment. A home equity loan or line of credit can help you protect and build on your home’s value by completing renovations. Your loan can also make it possible to add that second bathroom or home theatre you have been dreaming of, or even that gourmet kitchen.
Travel – The vacation of a lifetime awaits. Perhaps you have always dreamed of traveling to Africa or China. Your home can be your ticket. Home equity loans can be used for just about anything you can imagine and the trip you have always dreamed of may be the perfect way to celebrate a 50th birthday or silver anniversary.
Buy a new car – Using a home equity loan can actually save you money when buying a car. A home equity loan can make it possible for you to approach the dealer with the full amount of the sticker price in hand giving you more power to negotiate and retain incentives. You may also save significantly off of dealer financing interest rates.
Home equity lines of credit make it financially possible to do more of the things that are important to you. These loans can be an important part of building a strong financial foundation for you and your family. But you must proceed with caution. Home equity loans are secured by your home. If you fail to honor the terms of the loan agreement, the lender may exercise the legal option of repossessing your property to cure the default. You could lose your home in as little as 5 weeks in some states. It is important to have a repayment plan you are comfortable with and to understand the laws in your state before you agree to the loan terms. A home equity loan should help you improve your financial picture, not risk homelessness.