Smart_Uses_For_A_Home_Equity_Line_Of_Credit by hashournonos

VIEWS: 0 PAGES: 3

									Title:
Smart Uses For A Home Equity Line Of Credit


Word Count:
589


Summary:
For decades, homeowners across the country have reaped the benefits of a variety of home equity loans. In
general, interest rates on these loans are lower than those attached to most credit cards and unsecured
personal loans. At tax time, home equity borrowers often enjoy a substantial break by deducting the interest
paid on their loans, up to $100,000.


Home Equity Loan Basics


There are two types of home equity loans. The most conventional (sometimes called a “second mo...



Keywords:
Home Equity Line of Credit,Home Equity Loan,HELOC,Ways to Use a Home Equity Line of Credit



Article Body:
For decades, homeowners across the country have reaped the benefits of a variety of home equity loans. In
general, interest rates on these loans are lower than those attached to most credit cards and unsecured
personal loans. At tax time, home equity borrowers often enjoy a substantial break by deducting the interest
paid on their loans, up to $100,000.


Home Equity Loan Basics


There are two types of home equity loans. The most conventional (sometimes called a “second mortgage”)
is paid in a lump sum, with a fixed interest rate and set monthly payments. The home equity line of credit or
HELOC is an account from which the borrower can make withdrawals as frequently as they like, provided
they don’t exceed their credit limit. HELOC interest rates are usually variable, meaning your monthly
payments will adjust, depending on federal rates. Loan payments are based on the amount withdrawn, not
the total amount you can borrow.


Choosing Wisely


Lump-sum home equity loans are usually a good choice if you have a specific project or purchase in mind,
such as renovating your bath or replacing that old clunker of a vehicle. Since HELOCs work more like credit
cards, they are well-suited to an ongoing expense like college tuition and provide the convenience of
multiple withdrawals. In each case, the most important consideration when borrowing against your home’s
equity is that you use the money wisely. Be sure you’re improving your immediate financial situation
without jeopardizing the future. After all, your home is probably your biggest investment, and any loan
could, potentially, lead to the loss of that investment.


Five Smart Ways to Use a Home Equity Line of Credit


1. Consolidate Debt


You don’t need perfect credit to qualify for a home equity loan, and borrowers often use their loans to pay
off high-interest debt and, potentially, improve their credit rating.


2. Build Your Dreams


Whether updating your kitchen or enhancing the home’s exterior, these projects can increase the value of
your home at resale time. The interest you pay could also provide a tax deduction. There are also
government-backed financial incentives for homeowners who install environmentally-friendly features like
insulated windows and energy-efficient heating systems.


3. Finance an Education


With college tuition costs escalating, using a home equity loan to pay for your student’s education could be
the smartest move you make.


4. Grow Your Business


Access to cash is a crucial step in starting your own business. Used wisely, a home equity loan can be a
convenient source of seed money.


5. Be Prepared


Your home equity loan can also provide a hedge against employment uncertainty or catastrophic events.
Many HELOC borrowers treat their loans as “security blankets” to keep on hand for emergencies.


A Few Not-so-Smart Ways to Use a Home Equity Line of Credit


Ransoming your future


A second mortgage is just that – an additional loan with monthly payments. Borrowing more than you can
afford to pay is worse than foolish; it’s potentially ruinous to your finances.
Paying for frivolous expenses


Designer shoe sale? Plasma screen TV as impulse buy? Probably not the best uses for your HELOC.


Falling back into the debt trap


One of the risks of using a home equity loan to consolidate debt is that – unless your spending habits change
radically – you could wind up in even worse debt than before and lose your home. As a one-time strategy for
taking control and paying off credit cards, a home equity loan is beneficial only if your household spending
habits undergo a radical transformation.




credit disputes letters

								
To top