The manner in which you use a home equity line of credit (HELOC) is up to you. As long as you qualify and find a lender you’re willing to work with, you can gain access to a line of credit that positions you to use the funds however you best see fit.
Of course, you don’t want to make this decision on a whim. You don’t want to apply for a HELOC just because you’ll qualify. You want to apply because you have a particular need in mind.
5 Ways to Use a HELOC
There is no shortage of ways to use a HELOC, but here are five of the most common:
1. Home Improvement Project
Even if you have the money on hand to pay for a home improvement project, it doesn’t necessarily mean you want to part with it. And that’s where a HELOC can help.
Maybe you want to renovate your kitchen or bathroom. Or maybe you want to add a deck or patio to your home.
No matter what type of renovation project you have on your radar, consider if it’s best to fund it with a HELOC.
2. Medical Bills
This is far from the most exciting way to spend funds from a HELOC, but it’s an option to consider should you find yourself facing this type of debt.
Even if you have health insurance, medical bills have the potential to pile up. And when that happens, you’re likely to come under quite a bit of stress.
With the help of a HELOC, you can pay all your medical bills and leave yourself with one balance.
3. Wedding
It doesn’t matter if you’re paying for your wedding or that of a loved one, such as a child, you know one thing to be true: it’ll set you back quite a bit of money.
And for that reason, you may want to tap into the equity in your home to pay for some or all of it.
The nice thing about a HELOC is that you don’t have to borrow all the money. You can use it like a credit card to pay for expenses as they arise.
4. Travel
For many people, there’s nothing more exciting than traveling the world. If this sounds familiar, it’s critical to set a budget and stick to it. And of course, that means knowing where your travel funds will come from.
A HELOC isn’t the only way to fund your travels, but it’s an option thanks to competitive rates (especially if you have good or excellent credit) and the flexibility it provides.
5. Consolidate Debt
A home equity line of credit is one of the better ways to consolidate debt, along with a home equity loan and personal loan.
If you have several different types of debt that you want to pay off and bring under the same roof, a HELOC can help. This leaves you with one payment, thus saving you money on interest and time managing your debt.
Final Thoughts
Above all else, don’t apply for a HELOC until you have a clear idea of how you’ll use the money. You don’t want to borrow just to borrow. You want to borrow because you have a need.
Once you’re ready to proceed, contact three to five lenders to learn more about the application process, rates, and other key details.
