Infographic: 5 Uses for a Home Equity Loan

Your home is one of your most valuable assets, so if you find yourself in need of some extra cash, you may want to consider tapping into that asset with a home equity loan. A home equity loan allows homeowners to borrow against the equity in their homes. The loan amount is based on the difference between the home’s current market value and the remaining balance due on the homeowner’s mortgage. You can use a home equity loan for a number of different major expenses, including:

Fund home renovations

The most popular use for a home equity loan, by far, is funding home improvements. Give your kitchen a major facelift, build that extension you’ve been dreaming of, or put in a sparkling blue pool using funds from your home equity loan. If you do decide to take on some home improvement projects, be sure to consider what kind of home improvement projects will add value to your home.

Take that dream vacation

That luxury cruise you’ve always drooled over, or that summer jaunt through Europe, can now be a reality! It’s important to budget carefully and make sure that you’re not setting yourself up for financial difficulties once you return home, but homeowners might consider using their equity to pay for a vacation rather than putting debt on credit cards to fund a trip.

Pay your child’s college tuition

Even if financial aid doesn’t cover college costs, your child doesn’t need to go into student loan debt to pay for college. Instead, tap into your home’s equity to cover those tuition bills and pay it all back at a steady and manageable pace. Generally, this is a good idea when mortgage interest rates are lower than student loan rates, which is more likely with private student loans than federal student loans.

Adopt a child

Have you held back on your dreams of adopting a child because of a lack of funds? Well, nothing’s holding you back now! Home equity loans can be used for almost any purpose, and adoption costs could certainly be one of them. You might opt for a home equity loan over another means of funding your adoption if the rate is the most favorable available. Be sure that you have budgeted appropriately if you choose this route, though – if you’re adding a new family member, you might think twice about risking your home as collateral.

Start a new business

Is a lack of start-up cash stopping you from starting your own business? Tap into your home’s equity to make your business dreams come true! Many aspiring entrepreneurs require some sort of assistance to fund their new business. A home equity loan can help avoid high interest rates and obstacles that are common with other types of loans. Additionally, if you are going to be a first-time business owner, you may not even qualify for a business loan yet.

For homeowners in need of cash, a home equity loan can be an excellent tool to take advantage of. Regardless of whether you’re updating your kitchen or starting your own business, a home equity loan can help you fund a wide range of things. It’s important to plan carefully and stick to your budget since your home is at risk if you do not pay the loan back, but as long as you are cognizant of the risk, a home equity loan can be a huge help!