HELOC, stands for home equity line of credit, a great way to get funds out of your home to pay for anything you need. You might want to spend it wisely because your home will be used for collateral. Before you plan to use a HELOC, make sure you understand when it is wise to use and if it will help you maintain your financial well being.
A good thing about a HELOC is that you can use the money anytime with no restrictions on how many times you dip into the credit line. When you pay down your balance, you can use those funds again without having to reapply for a HELOC. Remember though you will have to pay interest on what you withdraw.
Even though a HELOC can be used for tons of things, here are the most popular things it is used for. Homeowners will always have home improvements. A HELOC can pay for a new roof, room additions, updates on the kitchen and bathroom, HVAC units. It is also used many times for paying off bills. Consolidating bills is a great way to use a HELOC. You can start by paying off the high-interest rate debts with the HELOC. You will then just have to pay a monthly payment back to the HELOC instead of several different creditors. It is always good to have funds for emergencies and a HELOC is perfect for an emergency fund.
With that being said there are many unwise choices when it comes to spending your HELOC. These include everyday expenses like groceries, gas, clothing, eating out, entertainment and leisure activities. These items should be taken out of your monthly budget. If you are starting a business or want to invest, a HELOC is not the way to go. Remember a HELOC uses your home as collateral so this can be a very risky choice.
A HELOC can be a great way to help with your finances, but you should speak with a financial advisor to make sure you are handling your HELOC wisely. There are many financial institutions online or in your area that can help you make wise financial decisions to help you reach your financial goals.
