5 Ways to Use a HELOC

A home equity line of credit (HELOC) is a very powerful borrowing tool, offering both financial freedom and flexibility for homeowners who have built equity in their home. Put simply, a HELOC is a flexible, variable-rate line of credit, secured by home equity, that has an almost unlimited number of uses.

Here are the five most common uses for a home equity line of credit:

1. Improving your home

Home improvement is one of the most common uses for a HELOC, and for good reason. Improving your home not only increases your enjoyment of your living space, but it can also increase your home’s value if used wisely.

Many people choose to modernize their kitchens, renovate their bathrooms, replace aging carpet with hardwood or vinyl plank floors, or add landscaping features. Others opt for a state-of-the-art outdoor kitchen, new patio, and more. The possibilities are nearly endless. If you can dream it, a HELOC can help you accomplish it.

A HELOC is also great for preventive maintenance—fixing issues that could prove costly in the future. For example, if your roof is nearing the end of its life, using a HELOC to replace it can help you avoid expensive damage from leaks. Or, if you’re in an area that sees substantial rainfall and frequent power outages, investing in a whole-home generator and a dual sump pump setup can keep your basement dry, even in the heaviest of downpours.

As a homeowner, you’re probably no stranger to emergencies and unexpected repairs. A HELOC can help you overcome whatever bad luck decides to throw your way. Because a HELOC allows you to draw only the funds you need, quickly, it’s perfect for life’s unexpected costs—inside the home and out.  

Summers and winters in the Midwest can be challenging. If your air conditioner dies, or your furnace conks out, a HELOC can help get your house back to temperature. Likewise, if your vehicle’s transmission fails or your tire goes flat, drawing the required repair amount from a HELOC is fast, easy, and convenient.

During the draw period of a HELOC, your payments are interest-only, which makes using a HELOC a far more attractive option than high-interest credit cards and personal loans.

2. Education

Investing in yourself or your children is the only can’t-lose investment strategy. A college degree or trade certification can help you advance in your field and significantly increase your future earning potential. Using a HELOC to fund your education, or your child’s education, has several benefits.

Often, the interest rate on a HELOC is lower than a traditional, private student loan. This means lower monthly payments and less interest paid over the life of the HELOC.

A HELOC can also be used for other education-related expenses, including textbooks, lodging costs (if you’re funding your child’s education), licensing fees, and much more.

Funding your education with a HELOC also allows you to start paying off the balance right away, instead of waiting until graduation.

3. Professional

Over the last few years, many people have made the decision to switch careers, or look for employment at other companies.

If you consider yourself among that group, a HELOC can help you stabilize your finances during the transition from one career or company to another. Having HELOC funds as a backup takes much of the stress out of the job-hunting process.

If you’re one of the millions of Americans looking to switch career fields entirely, a HELOC can help you fund continuing education, certification, licensing, and more.

4. Debt/Expenses

If you have balances on numerous credit cards, personal loans with high interest rates, or lingering medical bills, a HELOC could help you gain more control over your finances.

HELOCs are great for consolidating high-interest debt. Often, the interest rate on a HELOC will be substantially lower than that of a credit card. By using a HELOC to pay off your credit cards, you have the possibility of lowering your monthly payment, potentially saving thousands of dollars over the life of your HELOC.

And if you have numerous credit cards, a HELOC can be a great way to make monthly payments easy and convenient. With only one balance to pay, there’s less risk of a forgotten payment and credit score ding.

Likewise, a HELOC is a great way to pay down lingering medical debt with fast-approaching due dates. By doing so, you’ll avoid late fees and payment plans. 

5. Personal

If you have a large, one-time purchase on the horizon, consider using a HELOC over a credit card. With lower interest rates than most credit cards, HELOCs are great for doing general car maintenance like tire and brake replacement, buying a new washing machine and dryer or dishwasher, a generator, and much more.

Some people use a HELOC to pay for the costs of a wedding or a dream vacation. Others use their HELOC for a down payment on a vacation home or a boat. If you can dream it, a HELOC can help you accomplish it. 

If used responsibly, a HELOC is a flexible financial tool that can be used for home renovations or additions, large expenses, education costs, career changes, and much more.