Debt is the wealth killer. There’s one very notable exception, though, and you’re living in it.
If you’ve already paid for your house or own a large equity in your home, there are still ways you can reap the benefits of this “good debt.” You can use a home equity line of credit, or HELOC, to pay for a variety of expenses.
Let’s take a look at a few ways our Wasatch Peaks members are using their HELOC to improve their lives and financial well-being.
Financing home improvement. This is the most common reason given for using a HELOC. Using the equity that’s in your home to finance these improvements is the cheapest way to increase the value of your holding.
Debt consolidation. If you have a lot of “bad” debt, like credit cards, car payments or other high-interest loans, you can save money each month by paying off that debt with a HELOC. Your HELOC will have a lower rate of interest and you’ll only have to make one payment each month. Plus, you may be able to take advantage of preferential tax treatment for the interest. (Consult your tax adviser for details.)
Education. The cost of education seems to be continually rising. Funding your education with a HELOC instead of a student loan could help you save money. Rather than facing the high interest rates of student loans, a HELOC provides a lower interest rate.
Purchasing a car. Unlike your home, your car is certainly going to depreciate in value. This depreciation means the interest rates on auto loans will be higher than those on your HELOC. This will also allow you to work around financing fees from the dealer.
Major purchases. A home loan is one of the few monthly bills that actually builds wealth instead of zapping it. If you need to make a major purchase, the biggest source of capital you’re likely to have is your house. If you want to start a business, purchase a boat or an RV, or buy rental property, a HELOC is one of the best ways to finance it.
Covering emergency expenses. Most financial experts recommend keeping an emergency fund that could cover you for between six months and a year if you lost your job. If you don’t have the cash on hand, though, you can open a HELOC to cover medical expenses, car repairs and other unexpected costs. You should still work to build savings that can prevent borrowing in the event of a catastrophe.
Don’t wait until you’ve got a giant bill for remodeling or an expense you can’t cover. Call our Pleasant View Branch at 801-476-6304 and speak with a representative about how a HELOC loan can help you!