A Home Equity Line of Credit (HELOC) typically comes with lower interest rates and higher borrowing limits making it a cost-effective alternative to a credit card for financing major purchases or consolidating debt. Having a HELOC in place can also help you avoid relying on high-interest credit cards, allowing you to borrow responsibly while maintaining financial flexibility. Here are five smart ways to use a HELOC:
1 | Home Improvements
A HELOC is a great way to finance both major renovations and smaller home upgrades as they arise. Whether you’re remodeling a kitchen, updating a bathroom, or adding a deck, a HELOC provides access to funds without the need to take out a large sum up front.
Beyond large projects, a HELOC allows you to tackle home maintenance and upgrades over time. You can use it for installing a water filtration system, replacing carpets, updating windows, or repairing the roof, all of which can enhance your home’s comfort and value. Since HELOCs allow gradual withdrawals, they’re ideal for projects where costs are spread out over months or years, such as renovations with phased payments to contractors.
2 | Debt Consolidation
Using a HELOC to consolidate high-interest debt, such as personal credit cards or personal loans, can be a strategic way to lower your interest rates and monthly payments. As credit card interest rates continue to rise, transferring balances to a HELOC can help reduce overall borrowing costs while making debt repayment more manageable.
Additionally, paying off revolving credit balances with a HELOC may help improve your credit score by lowering your credit utilization ratio. However, it’s essential to avoid accumulating new debt after consolidating so the HELOC remains a tool for financial stability rather than additional borrowing.
3 | Business Needs
If you're starting or expanding a business, a HELOC can provide accessible capital without the strict requirements of a business loan. Instead of maxing out a business credit card, a HELOC can offer a more affordable way to finance startup costs, inventory, or operational expenses.
For new business owners, securing a business loan can be difficult, especially without an established history. A HELOC can offer an alternative source of funding, allowing you to access capital without tying up business assets.
4 | Education Costs
A HELOC can help finance higher education or professional development for yourself or a family member. It may offer a lower interest rate than private student loans, federal parent loans, or personal loans, making it a more affordable way to cover tuition, books, or housing costs.
Before using a HELOC for education expenses, compare rates and repayment terms to determine whether a HELOC or another type of student financing is the better option for your situation.
5 | Emergencies
A HELOC can serve as a safety net if you don’t already have an emergency fund covering three to six months of expenses. Unexpected costs—such as major car repairs, medical bills, or sudden home repairs—can be expensive, and putting them on a credit card could mean paying significantly more in interest.
Since a HELOC only requires repayment on what you borrow, having one in place means you can access funds quickly when needed without taking on unnecessary debt. While applying for a HELOC takes time, setting one up in advance means it’s available when an emergency arises, even if you never end up using it.
Contact us today to learn more about the benefits of a HELOC or home equity loan, or to get assistance applying.