A home equity loan can definitely be used in a lot of different ways. In fact, they are used for pretty much everything. You can spend your money however you want, but some ways make more sense and are worth more in the long run. Here are some smart ways to use the money in the equity of your home.
Changes to the house
This is probably the best thing you can do with the money from your home equity loan. If you use it right, it can quickly add value and equity to your home. Additions, siding, and remodelling the kitchen or bathroom are some of the best ways to improve the quality of your home right now. You should talk to a Realtor in your area first to find out what works and what doesn't when it comes to making repairs and adding value. You will want to check this especially if you are thinking about getting your house ready to sell.
Going to college
If your son or daughter is ready to go to college, you can use some of the money from your home equity loan to help pay for it. This could be a way to pay for college with low interest. It will also help you make sure that at least some of the costs can be paid for right away, instead of waiting for a grant or other fund to be approved.
Investments
This could work for you if you know a lot about the stock market or other high-yield investments. Since home equity loans are cheap, someone who knows the market can invest and make more money than what it costs. This is a good use of your money, and you might make enough to quickly pay off the home equity loan. People who don't know enough about the stock market to take risks on their own can get good advice from others on how to do this. But give them a chance to show how good their advice is by investing small amounts at first and then building up.
Consolidation of debt
A home equity loan is another good way to pay off your debts. It would let you pay off your debts quickly and get one payment. You have also made it easier to pay by spreading out your payments over a longer period of time. You can improve your credit score if it needs it by making payments on time every month.
A word of warning is in order here. You shouldn't think of debt consolidation as a chance to max out your credit cards again. Using your equity will give you a fresh start, but keep in mind that equity doesn't grow as quickly as a credit card balance. This means that you might not have enough equity to get another loan if you max them out again. Most likely, the other one won't be paid off by then, either.
Fun
When you take out a home equity loan, you'll probably want to do something fun with the money, since it's not easy to get cash. On top of that, it's your money. Just keep in mind that having fun is great, but it shouldn't be your main reason for taking out a home equity loan. It takes a long time to build up a lot of equity, and you should use some of it to invest.
Before you take out a home equity loan, look around for the best deal you can find. If you look around, you'll quickly see what you can do and which options don't measure up. You should also keep at least 20% of your home's value untouched. If you don't, you'll have to pay private mortgage insurance.
