If you’ve been a homeowner for a number of years, there’s a good chance that you’re eligible for a home equity loan.
But even if you are eligible you may be asking yourself: “Why would I take out another loan?”
A home equity loan has quite a few benefits that are worth investigating.
Does that mean you should take one out just because you can? Of course not.
What it does mean is that you should know about the potential financial opportunities one of these loans can offer – it might provide benefits that you don’t even know about.
1. You Want to Pay Off a High Interest Loan
If you have an existing high interest loan, using a home equity loan to pay that loan off can be a smart way to save money in the long term.
Home equity loans come at a relatively low interest rate, which means paying off the entirety of a high interest loan with a home equity loan will allow for lower monthly payments and less money out of your pocket at the end of the day.
2. You Have Multiple Debts You Want to Pay Off
You can also use a home equity loan to pay off multiple existing debts and consolidate them into one lower interest monthly payment.
This can make your bills easier to keep track of because they are all consolidated into one bill.
This can also lead to lower costs because a home equity loan has a smaller interest rate than a monthly credit card payment.
Plus, removing all of that debt can be positive for your credit; however, make sure that you can afford the monthly payment on a home equity loan before you use it to pay off other debts.
3. You’re Looking to Make Home Renovations
Large or extensive home renovations can become expensive quickly, and using a home equity loan to make these improvements can be a smart decision.
Depending on the type of renovations you’re trying to make you may qualify for certain tax credits and deductions by using this type of loan as opposed to a more traditional bank loan.
Mortgage interest is tax deductible, and this is often applicable to home equity loan interest — making them even more enticing.
Still, even if you do qualify for one of these loans, you should give careful consideration and thought before taking one out. Especially if you are using it to pay off existing debt; you don’t want to replace one debt with another.
Remember: neglecting to pay off your home equity loan can lead to home foreclosure.
Getting a Home Equity Loan
If you think a home equity loan is for you, HRCCU offers a range of fixed and adjustable rate loans ranging from 5 to 30 years. You can borrow up to 95% of the appraised value of your home with low closing costs if you qualify.