Have you ever wondered what a HELOC is, or what a HELOC is for? HELOC stands for Home Equity Line of Credit, and they have been around for a long time. This loan uses the equity of a home as collateral, set up as a line of credit. For example, if your home is worth $200k, but you only owe $150k, you have $50k in equity in the home. Some of that equity, typically up to a certain percent of the home’s value, is available to be used as a HELOC. For homeowners, HELOCs are a useful tool for many different situations, ranging from home renovations to debt consolidation to even emergency funds. So what options do you have with a HELOC?
Pay for home improvements
This is the most common purpose for a HELOC. You can finally finish your basement, or get nice granite countertops, new flooring, or even new furniture. Using a HELOC to pay for home improvements allows you to enjoy a low interest rate, while also upgrading your home. Now you can finally make your dream home come true! If you are considering selling your home, a HELOC could also be used to upgrade your home to increase the value before you sell it, leaving you with more profit after the sale. With a HELOC, your minimum payments are also interest-only, meaning that your minimum payments are much smaller than a regular loan. This allows you to gain more control by choosing which project you would like to start first, paying the smaller payment while the project is ongoing, paying it off when you are ready, and then moving on to the next project easily with the same line of credit!
Pay for tuition
Have you been considering going back to school, but unsure of how you would afford it? Do you hope your child will choose to go to college, but still need to find a way to help them pay for their education? Finances are often a huge barrier for people when they are planning whether or not to go back to school, and can be a source of stress when they want to help their child further their education as well. A HELOC is an affordable way to do either option! Avoid the high-interest federal or private student loans and pay for tuition faster with a lower interest rate. Using a HELOC also gives you the flexibility to pay for any additional college expenses that regular student loans may not offer.
Pay for a vehicle
HELOCs offer low interest rates that can sometimes be competitive to regular auto loan options, especially when it comes to multiple vehicles and larger vehicles. An auto loan rate can be determined by many factors such as year of the vehicle, how long of a loan term, and your credit. A HELOC, however, offers the benefit of a low interest rate, flexible payment amounts, and flexible terms. Purchasing a vehicle with a HELOC can help you save on interest, and offer a flexible monthly payment.
Another popular way to use a HELOC is to consolidate your debt. Most consumer loans have higher interest rates, which prolong the time it takes to pay off your debt, and you end up paying much more in interest. Using a HELOC not only means you get a much lower interest rate to save more and actually pay down debt faster, but it also means a flexible payment, allowing you to pay more when you are able, and pay less at times when things are tight. Interest on a HELOC also depends on the amount spent on the HELOC; as you continue to pay down your HELOC, you pay less interest.
Pay for medical expenses
Medical expenses are something that no one wants, but that everyone should be prepared for. We can’t always predict when something will happen that results in us paying medical expenses out of pocket. Using your HELOC to pay medical expenses can save you from the financial stress that comes along with it, and can save you from the high interest of any credit cards or loans that you might have otherwise taken out to pay your bills.
Pay for an emergency
Many people love having a HELOC for emergency funds. Plus, one of the best things about a HELOC is that the interest only accrues for the amount used. For example, if you take out a $50,000 HELOC, and you only use $10,000 from the HELOC, your interest only accrues on the $10,000 that you took out instead of the entire $50,000 line of credit. This means that if you have a HELOC already open in case of emergency, you don’t pay any interest at all, and it can remain open and untouched when not needed. Then when you do need to use it for an emergency, you get the advantage of a low interest rate rather than a higher interest rate of a consumer loan or credit card.
Not only can you do many things with a HELOC, but HELOCs are a great and secure way to borrow responsibly. Home Equity Lines of Credit also offer many great features, including low interest rates, and flexible monthly payments. Check out our HELOC products and apply for yours today!