Three Good Uses for a HELOC

Owning a home opens up a lot of opportunities. Not only can a house or condominium give you a secure place to live and raise a family, it can be an effective and stable long-term investment, and an asset you can leverage to finance large projects.

For example, once you've built up some equity in your home, you can apply for something called a home equity line of credit, or HELOC. This line of credit uses your home's equity as collateral to give you flexible access to cash at a more affordable interest rate than many credit cards and personal loans.

Here are three of the top ways a HELOC could help:

1. Use a HELOC to consolidate debt, saving you time and money

One of the smartest ways to use a HELOC is to pay high-interest rate debts like credit cards. This is called debt consolidation, and it lets you consolidate your credit card accounts, personal loans, car loans and other debt with one loan or line of credit, giving you a single convenient monthly payment, often at a lower interest rate than you would have otherwise paid.

A HELOC uses the built-up value of your home as collateral, which means you can often access a lower interest rate than many other types of loans and credit lines.

One note of caution: Be careful not to take on new credit card debt while using debt consolidation as a repayment strategy, as you could end up with an even larger total debt.

2. Start a home renovation

They say home is where the heart is, and of course you want to make your home as cozy, livable and modern as possible. Part of that is keeping it in good repair, but you can also upgrade your place with new features that transform it into your dream home.

A side benefit of repairs and upgrades is that they could boost the value of your home. Some projects will get you more bang for the buck than others, and you also need to make sure the value of your improvements isn't eaten away by overspending on materials and construction overruns.

Additionally, if you use a HELOC to repair or improve your home, you may be able to deduct the interest you pay on your HELOC when you file your annual federal income tax return. Consult a tax advisor to learn more about how this might apply to your specific situation.

3. Invest in your family's future

The low cost of borrowing offered by a HELOC can make it a good fit for other investments into your family's future success, such as helping to pay for education. You can, for example, finance the cost of private elementary and/or high school tuition, college or trade school.

In the case of college tuition, there may be other financing resources available, including financial aid and structured student loans, that you might also consider.

The flexibility of a HELOC could also come in handy when you need to pay for large purchases, such as travel expenses, dorm supplies, student fees and other costs not covered by traditional student loans.

Let’s make your possible, possible.

The easiest way to get started is to check out today’s rates. When you’re ready, apply online or meet with one of our home loan specialists.  We’ve also put together a list of documents you’ll want to have handy as you begin the application process. Subject to credit approval.

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Bank of Hawaii does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax or investment advice. You should consult your own tax or accounting advisors before engaging in any transaction.