Have a child going off to college and need extra money at the start of every semester? Starting a kitchen remodeling project that may take up to three years to pay off? A home equity line of credit (HELOC) can be beneficial by minimizing a total interest expense over a period of time while meeting other financial needs. Follow these helpful tips to understand how a home equity line of credit should work and stay away from large amounts of debt.

Understanding HELOC

In order to take out a home equity line of credit, a lender (bank or credit union) will agree to lend a maximum amount within an appropriate time period. The lender uses the borrower’s equity in their house as collateral for the loan. It is important to look over and assess the plans you can afford. The purpose behind a HELOC is to help financial needs, not put them more at risk.

Assist With Home Renovations

Looking to remodel a home but don’t have the necessary funds? A Home equity line of credit can be your best friend, helping to assist with the high prices of home improvement. Nothing beats the enjoyment of remodeling your home. When using a HELOC, you’re improving the house which could ultimately raise its value.

Pay Off Schooling

A home equity line of credit can be beneficial for parents when paying for their child’s schooling. The interest rates behind HELOCs tend to be lower than any other form of educational funding. When using HELOCs for schooling, the interest rate can also be tax deductible, making them a good source of temporary funding. It’s still important to keep an eye on how much you’re taking out and know your limits to avoid debt troubles down the road.

SEE: What to Look Out for to Avoid Scholarship Scams

Enter With Caution

Dealing with large amounts of money can always be intimidating. When you take out a HELOC, your house acts as collateral, emphasizing the importance of spending and borrowing responsibly. It’s hard to predict financially hard times, so examining past expenses and predicting future payments can help the decision behind choosing a credit plan. A HELOC is supposed to be beneficial, not a headache.

Consult with MNFCU, Today!

At MNFCU, we value all of our members’ financial needs. Our knowledgeable loan officers provide fixed and competitive rates.