5 things to do with a $50,000 home equity loan
If you own your home, you likely have access to a significant amount of money that can help you achieve your financial goals. That's because the average American homeowner currently has nearly $200,000 in equity that they can borrow against. Moreover, these loans usually come with competitive interest rates since they use your home as collateral.
Even if you only have access to $50,000 in home equity, taking out a loan against it may still be worth it. After all, there are quite a few smart money moves you can make with $50,000 of competitive-interest borrowing power at your disposal. So, what exactly should you do with a $50,000 home equity loan? Below, we'll break down five options to consider.
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5 things to do with a $50,000 home equity loan
Considering the fact that the average homeowner has about $200,000 in tappable home equity, it's highly likely that if you're a homeowner, you have access to at least $50,000. Here are five ways you could use a home equity loan to put yourself and your family on better financial footing:
Pay for home repairs or renovations
One of the best uses for a home equity loan is to pay for home repairs or renovations. There are a few reasons this could be a wise use of your home equity:
- Available funds: Home repairs and renovations can be costly. That can make it difficult to fund these projects with credit cards and personal loans. However, you can usually access larger amounts of money with a home equity loan than other means of financing.
- Tax benefits: If you use the money from a home equity loan to pay for repairs or renovations to the home you used as collateral, you may be able to write the loan's interest off on your tax returns. Depending on the size of the loan, this write off could lead to a meaningful reduction in your tax burden.
- Low interest: The average home equity loan interest rate is currently 8.92%. That's a significant savings from the more than 20% interest the average credit card charges.
Find out how easy it is to tap into your home equity for repairs and renovations now.
Pay off high-interest debt
According to the Federal Reserve Bank of New York, Americans owe a total of $1.13 trillion to credit card companies. So, it wouldn't be surprising if you have a few credit card balances of your own. However, as mentioned above, credit cards typically come with high interest rates, which can make them difficult to pay off.
Considering the fact that there's such a stark difference between home equity loan interest rates and credit card interest rates, a home equity loan can be an effective way to reduce the cost of credit card debt. Moreover, since most homeowners have access to a significant amount of home equity, there's a high probability that you can borrow enough of yours to pay off 100% of your credit card balances.
Invest in your future
Two of the best ways to increase your earning potential are to seek a higher education or open your own business. But both of these can be pretty costly. The good news is that a home equity loan may give you the financial ability to seek the degree you've considered or launch the business you've been wanting to open.
Cover medical expenses
The increasing cost of healthcare can be a serious financial burden. That's especially the case if you don't have health insurance or if you have a high-deductible health plan. What if you have to pay thousands of dollars to cover your deductible prior to a surgery, or you have to pay for costly prescriptions? You may be able to access the money you need with a home equity loan.
Fund investments
You could also use your home equity to build wealth by funding investments with it. The important thing here is that your investments earn a higher return than your interest rate on your home equity loan.
The average home equity loan interest rate is currently 8.92%. On the other hand, gold's price has grown by about 10.08% over the past year while the S&P 500 ended 2023 with a 24.2% gain.
Tap into your home equity today to potentially build wealth for tomorrow.
The bottom line
Your home equity could be the financial safety net you need in several situations. It can give you a way out of high-interest credit card debt, fund your education, help you launch a business and more. If you're a homeowner, consider using your equity to improve your financial well being now.
