Smart Ways to Utilize a Home Equity
Line of Credit

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smart ways to utilize a home equity line of credit

Having an available credit line, whether it is a credit card or home equity line of credit (HELOC), is something you need to manage properly to keep in line with your financial objectives. When you have built up significant equity in your home, it is tempting to put that equity to good use. In many cases, this is a smart thing to do, especially if the alternative is a loan with less favorable terms. Here are some smart ways to utilize a home equity line of credit and a few tips for staying on track.

  • Home Improvements- The best choices for upgrading and improving your home are the ones with the greatest return on your investment. Keep in mind you’ll also be paying interest on the amount you use from your HELOC and should factor that into what your improvement is costing overall. Upgrades to increase energy-efficiency, add livable square footage, or modernize the kitchen or bathrooms are among the most valuable home improvements to use a home equity line of credit for.
  • Consolidate Debt- If you have balances on credit cards that have high interest rates, using your HELOC to pay them off is a smart way to use it. There are two caveats to this advice, however – don’t use the credit card again, and pay on your HELOC at least as much as you did on the credit card each month.
  • Purchases You Would Have Used a Credit Card For- If you have a big expense that you would have obtained a loan for or used a credit card, it can be wise to use your home equity line of credit instead. The key here is to remember that you are using your home as collateral rather than the item you are purchasing. Some people do not care for the idea of risking their home to buy a car, for example, when risking the car on its own is more palatable.
  • Education- If you have one or more children getting ready to head to college or you are considering more education for yourself, using your HELOC can make sense as you are investing in yourself or your children’s future. Be sure to check out student loan rates and other options, but generally speaking, the terms on a HELOC will be more favorable.

When you call on us at BRM Lending to determine the best personal borrowing solutions for your situation, one of the avenues we can discuss is a home equity line of credit. We will also go over other options, such as unsecured loans and second mortgage loans, while considering your financial objectives. You can count on us for professional advice. You can trust us to keep your best interests in mind to get you the best possible financial products to achieve your goals. Contact us today to learn more.