The Best Uses for Home Equities

There are number of ways in which Home Equity loans can be used to your advantage. Although you should never lose sight of the fact that home equities are debt, secured debt against your home, if utilized properly they can actually help to improve your personal finances. But always be careful; falling behind on a home equity loan can subject your dwelling place to the possibility of foreclosure. Let’s look at some of the most valuable and beneficial ways that these loans can be used.

One of the main uses of home equity loans for many people is for debt consolidation. This allows you to combine your credit cards, installment loans and other personal unsecured debt into one monthly payment which could be substantially lower than the sum total of those individual payments. Because of the money saved on a monthly basis, you’ll have more income at your disposal. These funds can be saved, invested, or used for any purpose that you see fit. And because mortgage interest, even on a second mortgage, is very likely to be lower than personal loan- and credit card interest, the total amount that you’ll pay in interest charges will be greatly reduced. In addition, using a home equity loan for debt consolidation can also improve your credit over the long term, because your lower monthly payment will make you less of a risk to lenders.

Another great use for home equity loans is home improvements and renovations. Your house is an investment, and the more you put into it, the more value it will give back to you. Adding improvements to your home can greatly increase its worth, both to you personally as well as on the housing market, and you could realize a very hefty profit if you someday chose to sell it.

You must, however, be extremely careful when making choices on what improvements to make. You should spend money to improve areas that will greatly increase the value of your home. Remodeling either a kitchen or bathroom will bring the most value to your home. Adding an additional bathroom will also add substantial market worth. A good rule of thumb is that every dollar of improvement money spent should raise the value of the home by at least two dollars. You’ll also want to make sure that the improvements you make enhance the beauty of the home. While adding carpet and paint won't greatly increase value, they will make the house more appealing and easier to sell if done properly.

Many people also use home equity loans to pay for the cost of higher education for their children. Like home improvements, using a home loan to pay college expenses can be an investment. It can keep your children out of debt. Of course, it can also backfire if the kids don’t graduate.

These tend to be the best uses for home equity loans. The equity that you use should provide the prospect of a long-term investment or benefit. Many people do use home equity loans to buy other things that they want or need, things such as a boat, a nice car, a vacation, or to cover major medical bills.

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