5 Great Reasons to Consider a Home-Equity Loan
When you pay your mortgage every month, it can feel good to be putting your money toward a true investment. But as your repayment plan moves forward, your equity also grows—and this can be a valuable tool when used properly.
Not all uses for a home-equity loan are financially prudent—but here are a few potentially good reasons to consider one.
You’re selling your home
Making use of your home’s equity when you’re about to move out might sound counterintuitive—but the truth is, a home-equity loan could come in handy when you’re prepping a home for sale. Think of the quirks about your house that might trip up a negotiation process—a plumbing leak, outdated wiring, a front door that’s getting a little rusty—and imagine how much a home-equity loan could assist in sprucing the place up before you put it on the market. (Just make sure to only use it for improvements that could verifiably improve your selling proposition or home value!)
You’re paying off multiple credit cards
Besides the inherent hassle of having to make monthly payments to multiple credit cards, there might also be the added detractor of having varying levels of interest on each. If you’re tackling some high-interest debts, a home-equity loan might help you stabilize not only your monthly budget, but also the amount of interest you’re paying for the life of the loan. Weigh the long-term cost of juggling credit card and personal loan debt against the benefits of a given home-equity loan program.
You have an unplanned expense
Though you probably have (or at least have the intention to) put some funds aside as a “rainy day fund,” a home-equity loan can also come in handy when an emergency arises. A plumbing or electrical issue, car breakdown or job loss can be a potential unplanned expense with which a home-equity loan could assist.
You need seed money for a business
One of the most difficult parts of getting a business off the ground is having the startup money to cover the initial costs. Instead of digging into your wallet to rack up more credit card debt, one possible solution would be to leverage your equity to get the ball rolling. Just remember that you’re borrowing against your personal property, so prioritizing paying back your loan once your business comes solvent will be key. Never forget to only accept terms in which the payments are manageable in your monthly budget.
You need an escape
Not all uses for a home-equity loan are necessarily grounded in debt consolidation or covering major home or personal business expenses. In fact, one potential use for a product of this nature is to cover a much-needed family vacation. If there’s a particularly great rate you want to take advantage of, this might be a golden opportunity for an escape! Just keep in mind that you should only engage a home-equity loan for a luxury item such as this if you know you have the financial ability to manage the repayment post-trip.
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