5 Effective Ways to Use a HELOC

Well, the financial planning season has arrived. It’s the time when people start to map out expenses for the rest of the year. As you see your list of upcoming projects and expenses grow, you may be wondering how you’re going to fund them all. We have good news: A home equity line of credit (HELOC) may help.

In the simplest terms, a home equity line of credit works a little like a credit card—except it’s secured by your home. Bank lenders approve you for a specific amount of credit based on the amount of equity you have in your home. The best part is, you’re not required to borrow up to the limit of your credit line, which means you won’t have to advance more than you need. A HELOC gives you instant access to cash to use anywhere and on anything. 

To help you consider some different options, we’ve compiled a list of the five most effective ways to use a HELOC.

HELOC Use 1: Home Improvements

Here’s a selection of common home improvements that will provide you with the most return on your investment (ROI).  

  • Siding replacement: $6,000 to $8,500 (83.9% ROI)
  • Minor kitchen remodel: $18,500 (81.8% ROI)
  • Garage door replacement: $1,062 (80.7% ROI)
  • Midrange wooden deck addition: $10,350 (80.6% ROI)

After seeing these costly figures, you may be asking yourself, “Are home improvements worth it?” Well, it all depends. If you’re thinking about replacing your kitchen and building an indoor ice skating ring, that might seem like a good idea to you, but not necessarily to the average buyer. But if you’re thinking about upgrading the old kitchen with new cabinitery and countertops, then it’s probably worth it because of its ROI.

It also depends on the quality of the installation or remodeling. Consider having professionals carry out the work so your home improvements don’t turn out like these. But whether you do the home improvements yourself or have a professional do them for you, a home equity line of credit is a great way to pay for these big-ticket expenses.

HELOC Use 2: Vacation/Travel

Summer is right around the corner, so families are starting to plan their upcoming vacations. Though certain vacations can be cheaper, many popular destinations can cost a family thousands of dollars. For example, the average trip to Disneyland for a family of four is around $3,000. A HELOC can be a good way to help finance your vacation or summer travels, while also alleviating the stress of having to use a credit card or cutting back your regular budget.

HELOC Use 3: Life Event Payment

Certain times of the year are more financially demanding than others. There are personal and family costs—like weddings, funerals, births and accidents—that can put a strain on a family budget. After the holiday season, most Americans can add $986 in debt rolling into the new year. Over half (52%) of holiday debtholders use a credit card to finance those expenses. Rather than using a credit card, which can often have higher interest rates, a HELOC can help fund those seasonal and family expenses.

HELOC Use 4: College Education

Are you thinking of going back to school? Going to grad school isn’t cheap, with a master’s degree costing anywhere from $30,000 to $120,000. However, it’s the long-term return on your investment that can make the cost worth it. Studies show that those with a master’s degree earn 15% higher income over the lifetime of their career. A HELOC can help fund any educational costs, whether they are for your college-age child or yourself.

HELOC Use 5: Manage Cash Flow

More and more people are looking to the equity in their homes for help with financial flexibility or cash flow management of their finances. A home equity line of credit generally has lower interest rates than a credit card or personal loan, since the loan is secured by your home. You also have flexible borrowing because there are no restrictions on how you can use funds from a HELOC.

These are just five ways you can use a home equity line of credit. Really, the possibilities are endless. Whatever your financial needs are, a HELOC can help you take the next step in crossing some of those to-do’s off your list or making your next dream family vacation a reality. 


The information provided is meant for general informational purposes only and does not constitute tax, business or legal advice.