iQuanti: A home equity loan, also known as a second mortgage, is a common tool that smart homeowners use to pay for various needs. Everyone’s situation is different, and be sure to speak with a professional to know what will be best for you. But in any case, it’s always worth looking into how you could take advantage of competitive rates, such as the low home equity loan rates from Discover.
Consolidate Your Debts
Compared to other debts, home equity loans tend to have lower, fixed rates and the repayment period can be spread out over a longer period of time. That means you could use your home equity loan to immediately pay off high-interest rate credit card debts or personal loans, and then enjoy a lower interest rate and lower monthly payments. Not only does this give you the convenience of paying one bill instead of several, but by consolidating your other high-interest rate loans, you could end up paying a lower interest rate and spend less money to pay off the total debt.
Bear in mind that when you consolidate your debts in this way, your home is being used as collateral, so if you can’t make your monthly home equity loan payments, you could lose that home.
Improve Your Home
Many borrowers use a home equity loan to invest in renovating their home and improving their property. This may help to increase the value of the home, which can often offset the cost of the renovations if not turn a profit. When you use a home equity loan to improve your home, the interest on that loan may also be tax deductible. Consult your tax advisor for more information.
Refinance Your Mortgage
Refinancing your mortgage is essentially replacing your current mortgage with another one. One of the most common reasons to do this is to take advantage of a lower interest rate and/or lower your monthly mortgage payment.
One scenario where it may not make sense to do this is if your mortgage is close to being paid off and you refinance into a mortgage that lowers the monthly payments in the short term but prolongs the debt to the point where you end up paying more in interest long-term. It’s always wise to calculate your options to determine what makes the most sense for you.
Pay for Major Expenses
When it comes to getting a loan to cover major expenses, borrowers tend to look for the lowest interest rates possible, which home equity loans tend to offer. In case of an emergency, such as catastrophic medical expenses, a home equity loan can be a great option to help pay off the debt gradually.
That being said, given that the home is used for collateral, it’s not usually advisable to use a home equity loan to pay for something like a vacation. Smart borrowers tend to use home equity loans to pay for necessities such as medical expenses, cars, or education.
Ultimately the smartest ways to use a home equity loan come down to the numbers. Depending on your current mortgage and equity, a home equity loan can be a great way to save money and consolidate debt.
Source:https://www.newswire.com/news/4-smart-ways-to-use-a-home-equity-loan-21587278
