| If you’ve thought about getting a home equity loan, | | | | education. College costs are increasing every year so |
| you should first consider the best way to make use of | | | | this could be a wise choice and could help prevent |
| the funds. Here are three ideas. | | | | your child from starting out in life with too much debt. |
| The home equity loan has become one of the most | | | | While this is an idea worth considering, there are some |
| popular lending choices available to consumers. | | | | drawbacks. |
| Remember that equity refers to the difference | | | | First, you also have to consider whether or not |
| between what is owed in on the property and its | | | | you’ll need to access your home’s equity during |
| value. If you’ve made a good investment, you could | | | | your own retirement. These two life milestones tend to |
| have a boatload of equity in your home but the | | | | go hand in hand and this might be a good time to put |
| question is how to wisely use that home equity loan. | | | | your own needs first, especially if your child has other |
| Use #1 – Consolidate Debt | | | | funding options. Be sure that he or she explores all |
| Probably the most common way to use a home | | | | options, including federal grants, federal student loans, |
| equity loan is for debt consolidation. Most of the time, | | | | and scholarships. Another idea is for you to take out a |
| these loans have lower interest rates than other types | | | | federal PLUS loan using your home as collateral. |
| of debt. For example, the average credit card interest | | | | Use #3 – Fixing Up the Home |
| rate is around 16%. If you are struggling to pay back all | | | | The second most common use for a home equity |
| of those smaller examples of debt, you can use the | | | | loan is repairs and improvements to the property. The |
| funds from home equity loans to pay them all off and | | | | basic idea is that the changes will actually improve the |
| free up some cash. You’ll end up with a lower | | | | value of the home which means more equity. Plus, if |
| interest rate and a better debt to income ratio in some | | | | there are major repairs needed and you can’t |
| cases. | | | | afford them in any other way, this is definitely a resort |
| The biggest problem with taking this route is that if | | | | you can choose. |
| you’re the type of person who runs up a lot of | | | | Be aware though that not all of the changes you add |
| debt, you may end up repeating the process once | | | | are going to boost the value of your home. You also |
| your credit cards are freed up thanks to the home | | | | need to realize that your home’s value is also |
| equity loan. These actions could lead you down a | | | | closely tied to the neighborhood in which you live. If you |
| financially disastrous road. | | | | are going to do repairs, consider focusing on the |
| Use #2 – Children’s Education | | | | kitchens and bathrooms because these changes are |
| If you have kids going to college, you may also | | | | the most likely to increase value. |
| consider using a home equity loan to pay for that | | | | |