Making the Most of Your Home Equity Loan

Using the equity in your home to your advantage makes perfect sense. And in many cases, it can save you money, simplify your life and leave you more financially secure.

Debt Consolidation

Ever since the first credit cards were issued in the 1920s, they've been the basis for a love/hate relationship with consumers. It's all too easy to be seduced by these small, plastic charlatans, who lure us in with the instant gratification of being able to purchase things we couldn't otherwise afford. By the time we catch on to their money-sucking scheme, we're hopelessly trapped in a revolving credit door, from where we watch our hard-earned dollars get spirited away to pay interest on items we'd bought years earlier--while almost none of it is used to pay for the actual purchases.

A home equity loan can stop that revolving door, break the hold credit cards have on your financial future and put you on the road to becoming debt free. With an installment loan structure that actually allows you to pay off your debt and an interest rate that's often about a quarter of that charged by credit card companies, a debt consolidation home equity loan can save you a significant amount of money in the long run, while offering the convenience of just one monthly payment. As if that wasn't enough, in most cases your greatly reduced interest will be tax deductible.

College Tuition

Although interest rates fluctuate and various government programs offer different deals to college-bound youngsters, the interest associated with a home equity loan generally checks in several points below that of most student loans--sometimes by as much as a third. Additionally, home equity loans aren't subject to the income constraints that prevent some families from taking advantage of federal loans. And, again, because a home equity loan uses the borrower's house as collateral, the interest is usually tax deductible.

Financial considerations aside, the advantages to borrowing against your home equity to finance your child's education could fill a college textbook. Because the money is given to you and not the school, you can use it in whatever manner you deem fit--for school clothes, a computer or even dorm room decor. Plus, ungoverned by the regulations often associated with student loans, your child can learn at his or her own pace by attending school part time or full time. And there are no complicated financial aid forms to fill out.

Home Improvements

If you've been considering a major renovation or addition to your home, what better way to pay for it than by recycling the money you've already invested into it? By using a home equity loan to fund a major home makeover, you'll likely increase its market value and practically guarantee more money in your pocket when it comes time to sell.

A New Vehicle

After investing so much into providing a secure, comfortable home for your family, it makes sense that you'd want to maintain a reasonable fraction of that security and comfort when you're out and about, too. When you're ready to upgrade to a new vehicle, purchasing it with money obtained through a home equity loan, which offers a lower interest rate than do most conventional auto loans, you'll find yourself on the road to a brighter financial future.

Other Uses

You can use the money obtained through a home equity loan for just about any major expense, like paying for a wedding, buying land, purchasing a boat or another type of recreation vehicle, installing a swimming pool, taking care of medical bills or building a guest house on your property--the possibilities are endless.