In today’s unsteady economy, more and more individuals are looking for ways to access funds to either complete home improvement projects, pay off credit card debt, or take a family vacation.
For those who are fortunate enough to still have equity in their homes, a home equity loan is an excellent way of meeting immediate financial needs and wants that may not be attainable without it. The uses of home equity loans are seemingly endless. Depending upon the amount of equity you may have in your home, expenses that would normally throw an average individual into debt can be eliminated.
Debt Consolidation
Debt consolidation is a very popular and smart trend, especially in the economic downturn at present.
Taking advantage of a lower interest rate equity loan can drastically reduce credit card debt as well as drive down the balances on medical bills. The amount of money that can be saved in interest alone is phenomenal.
Education
Another positive use of an equity loan is education. The cost of a college education in the 21st century is astronomically higher than in previous years.
Many people with college-bound children bring in too much income on paper to qualify for certain grants and student loans. However, with a home equity loan, the funds may be used to pay for college tuition and living expenses incurred by a college student.
Home Improvement
Home improvements and house additions are great ways of raising the value of your home.
Larger purchases, such as new appliances, are wise to make with an equity loan. Not only are these specific types of purchases necessary, but they are also very sound choices. Most homeowners cannot afford to buy big-ticket household items without a loan.
Buying a Car
Another possibility as far as purchases are concerned is buying an automobile.
With credit scores affecting the interest rates, individuals who have less than stellar credit are able to buy a new vehicle with a home equity loan. It also saves the buyer an enormous amount of interest payments that can take up to 60 months to finally pay off.
Start a Small Business
One of the most overlooked options to spend a home equity loan is by starting up a small business. To qualify and obtain a small business loan through the government is very difficult.
With an equity loan, the funds are readily available for use. Plus, it leaves the federal government out of your new business venture.
Final Thoughts
Having discussed many solid ideas on the uses of home equity loans, let’s look into some not-so-smart uses.
First, it is unfortunate that many people, once they receive their loan, begin using the money as if it were replenishable income. Running to the ATM to withdraw equity loan funds for purchases such as groceries, gasoline, entertainment, or other minor purchases will cause the loan to disappear in quite a short time period. When using a home equity loan, tangible and lasting purchases of value are the smartest ideas.
A home equity loan can be a convenient means of attaining funds for projects, large or small. It is again very wise to pay down high-interest debt with such a loan as well. However, steer clear of poor spending habits and using your equity loan as a bottomless ATM. Smart options for purchases will always be the wisest direction to spend your funds.
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