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5 Smart Uses for a HELOC

August 13, 2021
A family reading a book on the couch.

It’s not common to find a loan you can withdraw from as needed and use for just about anything. In the world of borrowing, home equity lines of credit (HELOC) offers a unique opportunity. A HELOC works similarly to a credit card, but may be better suited for larger expenses and generally has a lower interest rate, as you borrower against the equity in your home that is used as collateral. Here are some smart ways to utilize your HELOC:

Debt Consolidation

A home equity line of credit typically has a better interest rate than other types of loans. That makes HELOCs a powerful tool for paying off and consolidating debt. Financial obligations such as auto loans, personal loans, and credit card balances with high interest rates could be consolidated with a HELOC. This form of debt consolidation can provide lower interest rates and eliminate multiple payment due dates. The downside of a HELOC is that it uses your home as collateral, so if you fail to repay it, you could put your home in jeopardy.

Higher Education

College is expensive, there’s no doubt about it. And if you or your child don’t qualify for low-rate, flexible federal student loans, borrowing against your home’s equity may be one of your better borrowing options. Before committing to any type of loan, compare the interest rates, repayment flexibility, and potential borrower benefits, to choose a financing option that best suits your needs.

Home Improvements

One of the most common reasons for taking out a HELOC is funding home improvements. When considering home improvement projects, be sure to weigh the potential ROI (return on investment). Upgrades such as a new deck or kitchen renovation may increase the value of your home and be well worth the investment down the road. Even if you plan to keep your home, upgrades or renovations can make it a better place to live. Or – in the case of energy efficiency upgrades – a cheaper place to live!

Emergency Expenses

In a perfect world, you would have an emergency savings fund with three to six months of living expenses in reserves. But unexpected expenses may arise that depletes your emergency savings fund, or you may not have one to draw on at all. Your HELOC can supplement emergency reserves if life events such as loss of employment, medical expenses or expensive auto repair bills leave you in the lurch.

What About Other Expenses?

There are plenty of other occasions in which you might want to use a HELOC. For example, you could use one to pay wedding expenses or get a business off the ground. If your other borrowing options have high interest rates or unfavorable terms, a HELOC might be your ideal loan option. If you need help making the most of your HELOC, speak with one of our knowledgeable representatives online or at a branch.

This article is for informational purposes only. It is not intended to serve as legal, financial, investment or tax advice or indicate that a specific DCU product or service is right for you. For specific advice about your unique circumstances, you may wish to consult a financial professional.

*Since Earn More is a sweep feature, eligible balances are automatically swept out to interest-bearing FDIC insured deposit accounts held at participating institutions throughout the country. You will still have access to your checking account funds.