4 reasons for taking out a home equity loan

A home equity loan can give you access to cash for a specific need, such as consolidating debt or improving your home.

Here are four reasons you may want to take out this type of loan.

Home Improvements

Taking out a loan against your home equity may be a smart move if you’re planning repairs or renovations that could potentially increase your home’s value. It may also be a great way to get more enjoyment out of your home — for example, by creating a more comfortable living space. 

You may be able to deduct the interest on a home equity loan secured by your main or second home, subject to certain dollar limitations, if you use the borrowed funds to "substantially improve" the residence. This includes increasing the value of your home, prolonging its useful life, or adapting it for new uses. Consult a tax advisor for more information about this potential opportunity.

One primary consideration when using your equity for home improvements is to keep renovation costs within your budget.

Financing Education

Home equity loans may be a good option for funding education because they generally have lower interest rates than student loans. 

Unlike most student loans, home equity loans use your property as collateral. This means your home may be at risk of foreclosure if you don’t make payments. 

Major Life Events or Emergency Expenses

You can use a home equity loan for a wedding, dream vacation, or other major life event. 

A home equity loan may also be a good source of funds for medical bills, expensive car repairs, or other emergency expenses. 

Secured loans like home equity loans may have lower interest rates than unsecured loans, which may make them a more affordable option for funding emergencies and major life events. 

Debt Consolidation

Consolidating multiple debts into a single home equity loan may simplify your life and help you manage monthly bills more effectively. 

That said, debt consolidation isn’t for everyone. You’ll want to check the math evaluate your financial situation before going down this route.

Final thoughts: Taking out a home equity loan

Your home equity may be one of the largest and most valuable assets you have. Remember that your home equity belongs to you and is there for you when you need it.