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The Washington Independent
Why you might want to take out a home equity line of credit

Why you might want to take out a home equity line of credit

Jun 21, 2021 08:18
finance
Dexter Cooke

Table of Contents

Paying for collegeConsolidating debtImproving your living space

It can be a good idea to tap into your home equity if you want to get some cash to pay for some improvements or renovations, but you will need to be careful if you are borrowing against your home. Still, there are several instances when it might be a good idea, such as when you need to consolidate debt or improve the home.

Paying for college

Getting a home equity line of credit is a great way to cover the cost of college, especially if you will not be able to pay for it on your own. Student loans are one way of covering the cost of education, but if mortgage rates are lower than the rates of student loans, consider going this route. Plus, you might consider extending the terms, so you do not need to pay as much each month. Still, you will want to do your research to find the best option. If you are looking into taking out a home equity line of credit, want to learn about tax treatments, or find out about interest rates, you can review a guide that will make everything clearer. Understand the consequences of defaulting on student loans versus defaulting on your home equity line of credit. Defaulting on student loans can hurt your credit, but you might lose your home with a lien placed on it, in addition to your credit, if you fail to repay your equity loan.

Consolidating debt

Getting this type of loan is a great way to consolidate debt with a higher interest rates since a home equity loan typically offers a lower interest rate. It is often useful for paying off credit cards or car loan debt. And you can get a longer term to pay back the funds to reduce your expenses. Of course, the downside is that you are turning the unsecured debt into secured ones. And if you are not careful to reign in your spending, you might rack up credit card debt once more. Still, if you have difficulties paying off your debt, you could consider getting a lower interest rate, which will ultimately save you money. Just make sure you have a solid plan to pay everything off.

Improving your living space

One of the more common reasons you might want to get a home equity line of credit is to make your house more comfortable in the form of improvements. It is an excellent way of financing projects such as renovations since these can improve the value. They will often pay for themselves over time. You could also consider replacing the entry door or garage, as well as a new patio. You can often deduct the interest that you pay on these loans if you are using the funds to build or buy the home that you are using to secure you loan. You can think of it as using your home value to increase its worth. Of course, you will want to do your research to ensure you will get a great return on your investment.

Dexter Cooke | He is an orthopedic surgeon who insists that a physician's first priority should be patient care. He specializes in minimally invasive complete knee replacement surgery and laparoscopic procedures that reduce pain and recovery time. He graduated from the Medical University of South Carolina with a medical degree and a postdoctoral fellowship in orthopedic medicine.

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