There can be a lot of confusion about home equity loans, its benefits and why one should consider it. A home equity loan is simply a type of loan that allows a borrower to use the equity of their home as collateral.
There are some Good Reasons for a Home Equity Loan
It comes down to responsible borrowing but for those in a serious pinch, this type of loan makes a lot of sense. In certain cases, and used properly and strategically, it can even provide a return.
This is a Great way to Tackle Home Improvement Projects
A home equity loan to improve your home is smart if you’ve done your homework and the renovations improve or fix an aspect of your home. Renovations can be pricy and most cannot go out of pocket for them. This is one of the main reasons that this type of loan exists and is worth considering.
If your home has increased in value, then you’ll have even more equity to borrow against in the future.
A Home Equity Loan can give you a Pool of Cash for Investing
Investing is an acceptable but less popular reason to apply for a home equity loan. You can borrow against the equity of your home at a low rate and then use that money to invest. Obviously, this is only recommended for those with experience, knowledge and a proven track record.
Paying for an Education
Many people struggle to pay for their education or for their children’s education. Even in Canada, where it is subsidized, it can be daunting. A home equity loan can help ease that burden, and while there are risks associated, it can pay off in the long term.
A Medical Emergency could Require a Quick Cash Infusion
As opposed to other loans and line of credits, a home equity loan to deal with a medical emergency is justified. It is also a much better idea to apply for this kind of loan than putting these types of expenses on a credit card.
And that brings us to Credit Card and its Debt
Borrowing against the equity of your home to pay off credit cards is never advisable. It is not considered a cure for consumer debt, especially considering that credit card debt is unsecured.
There are a lot of strong reasons to borrow against the equity built up in your home, and the best advice is to speak with the trusted professional.