Considering a home equity loan? Here are some of its best uses

There are times when you may need extra cash to cover a big expense (or expenses) that you can’t pay out of pocket. When many people return Credit card or personal loan To obtain these funds, homeowners have another source at their disposal: them Home is equal.

one with Home equity loan or Home Equity Line of Credit (HELOC), you can draw from your home equity to pay for any number of things. These products are often more affordable than other financing options and, in some cases, can even save you a little money on your taxes. However, like any other financial product, it’s important to know how to use a home equity loan or HELOC so you can borrow wisely.

Start exploring your home equity options online now to learn more

Best Uses for Home Equity Loans, HELOCs

While you can use your home equity for any number of purposes, these are often the best uses of your funds.

Best use for both products

Whether you take out a home equity loan or a HELOC, arguably Best way to use your funds That is to repair and improve the house Increase the value of your home. If these improvements are deemed eligible by the IRS, you can Deduct interest You pay when you file your tax return.

In particular, the The IRS states, “Home equity loan interest and lines of credit are deductible only when the borrowed funds are used to purchase, construct, or substantially improve the taxpayer’s home that secures the loan. The loan must be secured by the taxpayer’s principal home or second home. (Eligible residence), and fulfill other requirements.”

If you have a firm idea of ​​how much you need for home repairs or renovations, a home equity loan may be best for you because it pays a one-time, one-month amount. A HELOC is good when you’re not sure how much you need and want the ability to withdraw funds as needed

Find out how much you can borrow with a home equity loan here.

Best Uses for a Home Equity Loan

In addition to home repairs and improvements, a home equity loan is ideal Debt consolidation. These loans typically have significantly lower interest rates than credit cards and personal loans, so they’re a great way to pay off your high-interest debt and save money in the long run.

A home equity loan is also well suited Other one-time expenses For which you need a certain amount, eg:

• Paying a large medical bill
• Major expenses (such as a down payment on a new car or second property)

Best Uses for a HELOC

Because you can withdraw funds from a HELOC as needed, it can be a good way to finance sudden, large expenses if you don’t have enough. emergency fund in place. Unlike a home equity loan, where you must repay the entire loan amount, you only need to repay the amount borrowed from the HELOC. This flexibility can save you significant interest in taking what you need when you need it.

A HELOC is Good for other running expenses too When you’re not sure exactly how much you might need. These include:

• Paying for a child’s college education
• Retirement Income Payment
• Fund startup business expenses

Compare today’s best HELOC offers here.

Bottom line

Home equity loans and HELOCs can be valuable financial tools when used properly. By using your home equity to fund things like home renovations, debt consolidation and emergency expenses, you can meet your financial goals in a way that is often more affordable than credit cards and personal loans.

That said, it’s important to remember that your home acts as collateral for both of these products, meaning you could lose it to foreclosure if you’re unable to make payments. So, be sure Borrow only what you need And have a solid repayment plan in place before signing on the dotted line.