Surprisingly enough, your home’s equity can be your saving grace for paying off your credit card debt or taking care of those past due home renovations. How? Well, it all comes down to taking advantage of a HELOC. However, before you apply for any loan, it’s a smart idea to know exactly how it works first.
When it comes to Home Equity Lines of Credit, here’s what you need to know.
How Does a Home Equity Line of Credit Work?
A home equity line of credit, also known as a HELOC, is a line of credit secured by your home that gives you a revolving credit line to use for large expenses or to consolidate higher-interest rate debt on other loans such as credit cards.
Unlike a loan, a line of credit is readily available — you apply for the line once, then draw on it as you need it. Anything you’ve paid is immediately available to draw on again and you only pay interest on what you’ve borrowed.
How to Qualify for a HELOC
To qualify for a HELOC, you need to have available equity in your home, meaning that the amount you owe on your home must be less than the value of your home. With RMLEFCU’s HELOC, you can enjoy incredible rates (3.25% APR* for this month only!), which will come in handy especially in this competitive market.
What Do I Use my Home Equity Line of Credit For?
There are several things we think a HELOC can give you a hand with.
Home Improvements: HELOCs are a great method to tackle home improvements, since most home improvement projects are typically completed in separate stages, and you can take out the money you need when you need it. If the improvements add to your home’s value, interest paid on the HELOC may be tax-deductible.
Home Repairs: Discovering your home needs a major repair—like a new roof or re-piping –can put you in a tight spot if your emergency fund won’t cut it. A HELOC can help you take care of those repairs quickly and efficiently.
Financial Emergency: If you find yourself in a pickle and don’t have an emergency fund to fall back on, a home equity line of credit can be a godsend.
Paying off Credit Card Debt: Using a HELOC to pay off high-interest credit card balances is a wise move if you have a well-thought-out plan laid out that will help you avoid building up that debt again. The last place you want to find yourself is one where you have to pay off high credit card balances and HELOC payments.
Education: If you or your child are going off to college to earn a degree, a HELOC can be your ticket to paying off tuition and other school expenses. Having an open line of credit comes in handy since paying for education is a recurring expense. Instead of paying interest on a lump sum of money the second you get it, you’ll be paying for what you use, as you use it.
The Bottom Line
If you’re ready to make the jump and apply for a HELOC, you can rest assured that it’s never been easier with RMLEFCU. Apply here, through our comprehensive digital banking app, or at your local branch.
Still unsure of whether a HELOC is the right move for you? We want you to feel confident and comfortable with all of your financial decisions. Our team (and our Financial Education Center!) can give you the guidance you need to ensure that a HELOC is the smartest decision for you and your family. Give a call at 303-458-6660, stop by any of our branches, or visit our website to learn more.