A Home Equity Line of Credit (HELOC) can be very useful – from
financing a home improvement project, to purchasing a new car, to even
investing in another piece of property. But this line of credit is not the
right choice for every borrower.
Before taking out a HELOC, you should consider the following:
Are you an impulse buyer, typically making purchases you later
regret?
Are you just making minimum payments on your credit cards and not
paying down the balance?
As long as you answered a resounding NO to both of those questions, a
HELOC could be a very valuable resource for you. It can even be a way for you
to make money. Here’s how:
The interest you pay on your HELOC is tax deductible. So, using it to
finance a car purchase, for example, may mean recouping some money you would
normally lose in interest through a traditional car loan.
Also, many smart investors like to use HELOCs for the quick finance
of another piece of property. Because you will have access to finances
immediately for this purchase, you’ll be considered a cash buyer – which means
you’re likely to get a better deal and be a more desirable buyer than other
bidders without such quick access to cash.
If this is still sounds like a HELOC might be right for you, here are
some quick tips on what to look for:
A good rate. Keep in mind though, that HELOC rates are almost always
adjustable – so make sure the loan has a cap at a rate you can still afford.
Low fees. You are likely to have an annual fee--make sure it is under
$100.
Finally, make sure this type of loan suits your purpose. If you know
you can pay the loan off in a short time (under five years), the interest rate
may not be such a big factor in your decision.
If you’re interested in finding out more about a HELOC, check with
one of our loan officers for the going rates and options available to
you. Your home equity might be a lot more valuable than you think!
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