When You Have Equity In Your Home: How You Can Use A Home Equity Loan To Manage Your Overall Debt
Posted on: 17 April 2017
When you have equity in your home, it's useful to know how you can apply for a home equity loan. You don't have to use the loan to repair your home, or to make improvements. While some homeowners use their home equity loan for emergency needs, such as a new furnace or roof, others choose to use a home equity loan to reduce their overall debt load. If you are ready to get your finances under better control and you own a portion of your home, it's time to consider how you can use the equity in your home to give you a better financial future.
Structure Your Debt in a Different Way
If you have a high amount of credit card debt that you are trying to pay off at astronomical interest rates, it's time to think about your choices. When you get a home equity loan, you are borrowing off of the value of your home. With interest rates currently so low, it's financially smart to get a home equity loan to pay off credit card debt. While you will still have the same principal balance of your total overall debt, you will be paying it back at a lower interest rate.
Pay for College Tuition
When your child is going to attend college and you are struggling to pay for tuition costs, it's time to look at the equity in your home. While some people will use some of their retirement investments in order to pay for college tuition, this generally comes with penalties that are not worth paying. When you use your home equity instead, you won't pay the same penalties you would if you take money out of a 401K. When you need cash for your child's college, it's cheaper to borrow from your home equity than taking out student loans.
When You're Retired and Need Some Cash
If you are retired and you have quite a bit of equity in your home, you might want to consider borrowing some to supplement your retirement income. While you won't want to deplete the value completely, the interest rates are low on how equity loans. Before you use credit cards at a higher interest or buy a car at a high interest rate, you can get some extra cash out of your home instead.
When you have equity in your home, it can be used for a wide variety of reasons. For more information, contact companies like General Electric Credit Union.
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