How to use home equity to improve your earning potential
Your earning potential is typically dictated by a few things: your education, the equipment you have available to you, your experience and whether or not you own the business you work for. That creates a problem for many, as three out of four of these factors come at a cost.
You'll have to pay for your education and your equipment — and if you want to start a business, there are costs to contend with as well. But if you own your home, your home equity could be the key. If you have equity in your home, you may be able to access to the funding you need to increase your earning potential — no matter which route you decide to take.
Tap into your home's equity to improve your earning potential today.
How to use your home equity to improve your earning potential
"Tapping into your home equity normally allows you to borrow at a very competitive interest rate," says Shane Cummings CFP, CEPA, AIF, wealth advisor and director of technology/cybersecurity at Halbert Hargrove. "Home equity loans usually offer some of the best rates available because" the bank has "a lien on your collateral if you aren't able to pay."
So, how can these low-interest loans help you improve your earning potential? Here are three potential uses of a home equity loan that could have a positive impact on what you earn:
Cover education costs
You could use your home equity to cover the cost of higher education, whether that's a degree from a university or a certificate or training from a trade school. Of course, you'll want to exhaust your federal student loan options first, as those typically come with the best interest rates for education-based loans.
Still, home equity loans and home equity lines of credit (HELOCs) may have better interest rates than private student loans in some cases, making them a viable option for furthering your education. Moreover, you can only use federal student loans to pay for an accredited education. If you're considering a trade school or online program that's not accredited, you'll need to find another way to pay. And, home equity loans and HELOCs may offer a low-cost option.
Use your home's equity to access a higher education today.
Pay for equipment
There's often value in owning your own equipment, even if you don't want to own and operate your own business. For example, if you're a truck driver, you'll make more money if you own and operate your own truck than if you drive a company-provided truck. The same can be said for many other industries.
The simple fact is that companies know there's a cost involved in owning and maintaining equipment. Many companies would rather pay their employees and contractors more per hour or per job than deal with the hassles of equipment ownership.
That could, in turn, pay off for you. You could use a home equity loan to purchase equipment you may not otherwise have access to and increase your earning potential.
Start a business
Starting a business could greatly increase your earning potential. Ii often takes more than a good idea, drive and determination to succeed in business, but if your business is successful, the uptick in income could be life-changing.
That said, the old adage, "It costs money to make money," remains true in most cases.
But what if you don't have the money to start a business? You could save for years in hopes that one day you'll be able to start your dream company, but if you own a home, you may not have to. A home equity loan could give you the money you need to take the leap into small business ownership.
Tap into your home equity to become the business owner you always knew you were.
The bottom line
Increasing your earning potential isn't always a low-cost endeavor. It often takes quite a bit of money to do so. But that doesn't mean you're stuck at your current earning level forever. With the recent growth in home prices, there's a chance that you have equity in your home. So why not put that equity to work? Get a home equity loan or open a HELOC to access the money you need with an interest rate you can afford.
