4 reasons to use a Home Equity Loan
A Home Equity Loan can be a great way to take advantage of the equity you’ve established in your home to improve your financial well-being. First, ask yourself if borrowing against your equity is the right move for you.
What is a Home Equity Loan?
A home equity loan is an affordable means of accessing the equity in your home to pay for a variety of projects, without selling the home.
An SF Fire Credit Union Home Equity Loan features:
- A fixed interest rate lower than most personal loans or credit cards.
- A 15-year repayment period, longer than most personal loans.
- No pre-payment penalties.
- A one-time disbursement of funds in a lump sum.
A Home Equity Loan can be much more affordable and manageable than an unsecured personal loan or a credit card. However, it’s important to have a solid budget in place. Your Home Equity Loan is tied to your home, so you might run into trouble if you borrow more than you can afford to repay.
How to use Home Equity
If you’re ready to use your available equity, here are some of the best ways to use the funds to improve your financial picture.
1. Debt consolidation
High interest loans such as credit cards can cost the average American family thousands of dollars each year. With interest rates reaching 20% or higher, you might pay a lot for the privilege of borrowing. Additionally, many credit cards have a variable interest rate, making it harder to plan your repayment.
With a Home Equity Loan from SF Fire Credit Union holding a low fixed-interest rate, it’s an affordable way to pay off your debt quickly while paying less in interest, saving you money in the long-term, and letting you put more aside for savings. And the fixed rate gives you the peace of mind of knowing how much you’ll pay each month.
Is debt consolidation right for you? Use our helpful calculator to find out.
2. Home remodeling
When you own a home, you probably spend a lot of time thinking about home improvements, whether to build equity or just to make it more comfortable. Using a Home Equity Loan is an affordable way of financing major projects that will increase your home’s value.
One thing to consider, though, is that a Home Equity Loan disburses all the funds in one lump sum at the beginning. If you aren’t yet sure how much you’ll need for the project, or if you’re planning on paying for the project in stages over a period of months or years, you might want to consider a Home Equity Line of Credit (HELOC) instead, where you borrow the funds only when you need them, so you aren’t borrowing more (and paying more interest) than is needed at any given time.
3. Paying for a wedding
A wedding can be a once-in-a-lifetime event … but it can also come with once-in-a-lifetime expenses.
As with home improvement projects, a Home Equity Loan can be a good way to pay for a dream wedding at an affordable rate with the peace of mind that the interest rate won’t vary over the life of the loan.
However, as with home improvement projects, it may depend on if you’re wanting to pay for everything at approximately the same time. If you’re planning to spread the wedding expenses out over a period of months, you might prefer the flexibility of a Home Equity Line of Credit.
4. Investing in a business
Starting a business or looking to expand? Using a Home Equity Loan to invest might be a lower-interest-rate alternative to taking out a business loan, with a lot of flexibility.
However, be sure to consider your business outlook. Is it likely to repay your investment enough to cover the costs and risks of borrowing against your home?
We’re here to help
After considering these points, you may still have questions about your particular situation. Our Real Estate Loan Officers are here to help you answer questions about whether a Home Equity Loan is a good option for you.
