3 Different Ways You Can Use Your Home Equity Loan

posted on Monday, March 22, 2021 in Financial Tips

If you need extra funding, you can tap into your home's equity and use it as collateral for taking out a loan. This type of financing is known as a home equity loan or a second mortgage. The amount of money you can borrow will depend on the difference between your home's market value and your standing mortgage balance. The loan amount will be given to you in a lump sum, and it needs to be paid immediately.

Home equity loans have fixed rates, so monthly payments will remain consistent throughout the life of the loan. Repayment terms could range anywhere from 10-30 years, but this may vary depending on your service provider. If you're not sure how to use it, we've listed down some instances where you can utilize this type of funding.

Home Improvements and Renovations

If you've been wanting to upgrade your home but don't have enough funds to do so, an equity loan is a great option. It can be used for different purposes like expanding your property and remodeling an area of your house. This can also work to your advantage in the future as it increases your home's market value.

Debt Consolidation

If you have a standing balance from credit cards or other types of personal loans, you can use an equity loan to consolidate your debt. This works by combining all of your existing debts into one monthly payment. Repayment is significantly lower, as your total debt amount will be divided throughout the loan term. This can be anywhere from 5-10 years, but these numbers can change depending on your service provider.

Starting a Business

If you want to kickstart your business, home equity loans can provide you with the starting capital to do so. You can utilize it for various purposes like leasing commercial property, buying equipment, hiring employees, and paying taxes. Not only that, if you're planning to expand in the future, you can also use it to start a franchise or purchase an existing business.

Apply for a Loan with a Trusted Credit Union!

Whether you want to start a business venture or are thinking of remodeling your home, we'll help you secure the funds to do so! At Community 1st Credit Union, we offer two types of home equity products—home equity loans and home equity line of credit. If you need help finding the right type of funding, reach out to us today!