Whether you need money to pay off high-interest credit card debt, make improvements to your home or take care of an aging loved one, a home equity loan just might be your best choice. Taking out a home equity loan has a number of important benefits for homeowners, including these 5 major advantages.
#1. Interest Rates on Home Equity Loans Are Among the Lowest Available
If you are paying 18-20% on outstanding credit card debt, you are digging a deeper and deeper hole every single month. With interest rates that are high, it could take years or even decades to pay off even a small balance. If you owe hundreds or thousands of dollars, paying it off by making regular payments to your credit card company is simply not feasible.
A home equity loan lets you turn those high-interest credit card balances into a single predictable – and much more affordable, single payment. The lower interest rate means you will be able to pay the money back sooner and for far less interest.
#2. The Interest on a Home Equity Loan May Be Tax-Deductible
When you pay interest on your credit card balances, you get little for your money. You pay high rates of interest, and that interest is not even tax-deductible.
A home equity loan is a different story altogether. When you take out a home equity loan, you may be able to deduct the interest you pay when you file your annual tax return. Just check with your tax advisor to see how much you could save.
#3. You Can Use a Home Equity Loan to Spruce Up Your Home
Owning a home is not like renting an apartment. When something breaks, there is no landlord to call, and you are on the hook for the cost of repairs. If your home could use some sprucing up, a home equity loan can give you the cash you need to get it back in top shape.
Many homeowners use their home equity loans to repair leaky roofs, fix broken staircases and make their decks look like new. No matter what you use the money for, you will be enhancing the value of your home as well as its beauty.
#4. A Home Equity Loan is Flexible
If you need a set amount of cash to make home repairs or pay off your credit cards, a home equity loan is a great way to get that money. Sometimes, however, you do not know exactly how much you will need. A home equity line of credit can give you the flexibility you need while reducing your cost.
If you are putting an addition on your home, you can use your home equity line of credit to pay the contractor and buy materials while the job progresses. When the job is done, you can start repaying the loan while you enjoy your great new home.
#5. A Home Equity Loan Is Great for Retirees
Many people find themselves house-rich and cash-poor in retirement. They may have a $200,000 or $300,000 house that is fully paid for, but their retirement funds are lacking. A home equity loan allows those retirees to tap the equity in their homes and use it for repairs, improvements or even a great vacation.
Simply put, a home equity loan provides a convenient way for homeowners to get cash out of their homes, and many retirees use it for just that purpose. While a home equity loan is not right for everyone, it can be a godsend for the right borrower.