What’s the Best Way to Use a Home Equity Loan?
Q: With interest rates falling and home prices rising, it seems like a great time to tap into my home’s equity using a home equity loan. What’s the best way to use these funds?
A: A home equity loan can be a fantastic way to source extra funds during a falling-rates environment. Tapping into your home’s equity, or the positive difference between what is owed on a home and its current value, will give you the funds you need for a large expense with no additional strings attached.
With interest rates on a Kellogg Community Credit Union Home Equity Loan as low as 4.250% APR*, the repayment plan is always affordable. If approved, you’ll receive the funds in one lump sum.
Here are three forward-thinking uses for a home equity loan:
1. Home improvements
One of the most popular uses for home equity is for . These can be as major as adding a 1,000-square-foot extension to your home, as minor as replacing old carpet with new hardwood flooring or anything in between.
Using your home’s equity for home improvement projects is a smart choice. For one, the money you put into the renovations acts as an investment. If you choose improvements that increase your home’s value, you can make back the money you spent or even see a return when you sell your home.
It’s best to go for improvements that add lasting value to your home instead of blowing big bucks on superficial remodeling projects that may look dated just a few years down the line.
2. Debt consolidation
Another popular use for a home equity loan is to consolidate high-interest debt. Paying off multiple debts at high interest rates can be cumbersome and difficult to manage. Worse, the heavy interest rates mean more of the borrower’s money goes toward the lender and less goes toward paying down the principal of the debts. Using a home equity loan to consolidate debt to a single and no-interest or low-interest loan can slash a pile of debt by several thousands of dollars and help shorten repayment time by several years.
3. College education
When interest rates are falling, funding a college education through a home equity loan instead of a high-interest student loan can be a smart choice. Similarly, homeowners struggling to meet their student debt payments without defaulting on the loan might want to use their home’s equity to pay off the debt quickly and replace it with a more manageable low-interest loan. It’s important to note that paying off a federal student loan with home equity might not be the best choice, as these loans are sometimes eligible for partial or complete forgiveness..
Before you take out a home equity loan
A home equity loan can provide homeowners with the funds they need for a home improvement project, to get their debt under control, pay for their college education or other expenses and large purchases. However, before taking out a home equity loan it’s important to run the numbers so you are sure you can easily meet the regular loan payments. Otherwise, you risk defaulting on the loan and losing your home.
If you’re ready to take out a home equity loan, look no further than Kellogg Community Credit Union. Our rates and terms are always competitive. Visit us online or give us a call at 269-968-9251 to get started on your loan application today.
* APR = Annual Percentage Rate and is valid as of 9/2/20. Rates are subject to change without notice. Subject to credit approval and other conditions. Rates may vary based on term. Equal Housing Opportunity.
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