After years of effort, you have managed to pay off a big chunk of your mortgage and accrue a healthy amount of home equity. Now you need some cash and are considering taking out a home equity loan or line of credit. Before you take that step, you need to carefully consider whether it is a wise move. Often these loans end up improving your financial situation. In some instances, they can cause you problems. One of the most common reasons to take out a home equity loan is to remodel or repair your home. In most instances, taking out a loan for that reason is justified. Below are some other ways you can use a home equity loan.


If the rates on a home equity loan are quite low, it may make sense to borrow funds and invest them in the stock market. For instance, you may pay as little as four percent for the loan and make eight percent or more on your investment. Of course, this route is not without risk. Before you proceed with this plan, consult with your financial advisor for advice. You need professional help to evaluate its possible effects on your long-term security.


Instead of using student loans, some students have their education at least partly financed by home equity loans. Of course, this method puts the family home in danger if the loan is not paid properly, but it also has some benefits. A home equity loan usually has a lower interest rate than many other loan types. The interest from such a loan is also tax deductible. An added advantage is that they are often quick and easy to obtain. You need to work out a plan for your student to repay you before you give them the home equity funds. To avoid misunderstandings, put the terms in writing. With your home on the line, you cannot afford to overlook repayment details. 


If you have significant credit card balances or other high-interest loans, you may consider taking out a home equity loan to consolidate your debt. Experts recommend that you only make this move if you are certain you can easily make the additional loan payment and you have a minimum of 20% equity in your home. You must also change your spending habits. If you immediately run up more credit card debt, you are putting your financial future and your home ownership at risk. 

Before you put your home at risk, consult a financial advisor about your plans.