Do you have equity in your home? Are you interested in borrowing money, such as for a home renovation project or dream vacation? If so, then you need to learn more about a home equity line of credit.
While there are many options available to you, a home equity line of credit deserves some attention. And with so many benefits, you could soon find that it’s exactly what you need.
Here are just a few of the primary benefits of a home equity line of credit:
1. Competitive Interest Rate
When compared to a credit card, for example, you may find that the interest rate attached to a home equity line of credit is much more competitive. And with that, you’re not spending nearly as much on finance charges every month, which helps you financially over the long run.
Tip: compare the interest rate of a home equity line of credit to other options, such as a credit card and personal loan. This is the only way to know for sure if you’re saving money in this area.
2. Borrow Only What You Need
Unlike a home equity loan with which you borrow a lump sum of money, a home equity line of credit works more like a credit card.
If you’re extended a home equity line of credit, you have the power to spend the money as you see fit.
For example, you can take $1,000 today, $5,000 the next month, and then let the rest remain available to you. You get the point. You have the flexibility to do what you want.
And best yet, you can continue to use the credit that’s available to you. If you spend $25,000 and then repay it all, you can once again borrow it. It may not be something you want or need to do, but the option is there.
3. Interest May be Tax Deductible
Depending on your financial circumstances, you may be able to deduct the interest on your tax return. Alone, it’s not a good enough reason to secure a home equity line of credit, but it’ll definitely put a smile on your face when tax season rolls around.
Tip: discuss this with your tax professional to fully understand your situation and how to take advantage, if you qualify.
As you can see, there is no shortage of benefits associated with a home equity line of credit. However, before you contact a bank and sign on the dotted line, don’t lose sight of any potential pitfalls.
For instance, since you’re using your home as collateral, you must be 100 percent sure that you can make your payments. Neglecting to do so puts your home at risk, and that’s not something you want to take lightly.
If you’re interested in a home equity line of credit, contact three to five lenders to discuss your situation and learn more about the terms and conditions they can offer. This will help answer many of your questions, while also deciding if it’s the right choice for you and your finances at the present time.