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A home equity loan is a loan that is secured against the value of your property. It is usually registered against your home as is any current mortgage. Home equity loans give valuable relief in times of financial hardship. In financial terms, your home equity equals the amount your home is worth today, less the amount that’s left on your mortgage.

A home equity loan is a very valuable source of funding for two reasons:

  1. It tends to increase as the value of your property increases or your mortgage reduces.
  2. It can be used as collateral to borrow more money at better interest rates than you’d get with most unsecured loans.

Beyond these two reasons, home equity loans can be very beneficial. Since the money obtained from it is yours, it can be used for a number of purposes. Below are just a few of the ways a home equity loan (also called a second mortgage loan) can help you.

  1. Consolidate Your Debt

Consolidating multiple high-interest credit card payments, consumer debt loans, or overdraft balances into a single (usually lower) monthly payment not only simplifies your finances but can also freshen up and improve your credit rating. Just use your home equity loan to pay out any higher-interest outstanding debts.

  • Start or Expand a Business

Whether it’s time to hire more staff, expand your marketing reach, or launch a new product or service, your home equity can help you cover the start-up costs for a new business, or provide capital for an existing company.

  • Fix Up Your Property

Considering renovations? From major repairs to large-scale renovations, home equity loans can be used to increase the overall value of your property.

  • Take a Vacation

Going on vacation not only reduces stress and recharges your stamina but stepping outside your daily routine can lend a fresh perspective to personal and professional goals. Consider using a home equity loan to make that dream vacation happen this year.

  • Invest for the Future

We don’t always know when an opportunity would come knocking. But knowing you can tap into your home equity when you need to gives you the flexibility to make quick decisions and the ability to capitalize on those fleeting investments.

Nowadays, people can obtain home equity loans regardless of what the money will be used for. After all, it is their money, so it is up to them to spend it as they wish, however some ways to use a home equity loan are more financially rewarding than others.

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