Home Equity Loan Uses

Home equity loans are attractive because they offer low rates and the interest is usually tax deductible.

But this doesn't mean that home equity loans should be used for every financial situation where money is needed.

Just as with a primary mortgage, a home equity loan can have serious consequences if something happens that prevents you from making the scheduled payments. You could lose your home.

So do not think of a home equity loan as a "magic money machine" to finance all of your expenses! 

However, if care is taken, home equity loans can provide the best option for obtaining money when you need it.

Here are some of the best uses for a home equity loan:

Home Improvements

Home equity loans are most commonly used to make home improvements or repairs. This is one of the best uses for a home equity loan, because in most cases, you'll be increasing the value of your home (and thus increase the equity).  This is as attractive to the lender as it is to the borrower. It's an investment for the homeowner that will provide benefits in the future... either when the home is sold, or when another equity loan is necessary.

Consolidating Other Debts

If you have several relatively short-term loans, you may have high monthly payments: car payments, credit card payments, personal loan payments, medical bills, etc. Consolidating all of those separate payments into a home equity loan payment will almost always result in a significantly lower monthly payment. You'll have fewer payments to keep track of, making managing your budget an easier task.

However, do not fall into the trap of then again running up your credit card and other debts!

College Tuition

Whether for your children or for yourself, a college education is important, but expensive! Using a home equity loan can make the payments manageable. Consider this an investment in your--or your children's--future. Perhaps a better career an increased income will result. Use it to pay off your loan early!  

If you use restraint, using a home equity loan for these and other expenses will offer you maximum flexibility and low cost.