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What can a home equity loan be used for?

Home equity loans can be used for anything; however, home equity loans should be used for making purchases that increase your home’s value or improve your financial situation. Some examples of home equity loan uses include home renovation, paying emergency medical bills, renovating your home, or paying off high-interest debt.

 Because a home equity loan is a type of secured loan that lets you borrow money against the equity of your home, consider carefully whether you really need this type of loan. When you’re approve for a home equity loan your home is used as collateral to “secure” the loan, promising the lender that they can take your home if you fail to repay the loan in full.
At CU SoCal, we make getting a home equity loan easier!
Call 866.287.6225 today to schedule a no-obligation consultation and learn about our mortgages, home equity lines of credit, auto loans, personal loans, checking and savings accounts, and other banking products. As a full-service financial institution, we look forward to helping you with all your banking needs.

Get Started on Your Home Equity Loan Today!

Pros of home equity loans

As with all financial products there are pros and cons to consider. Here are some home equity loan pros and cons:


  • Lower interest rate. Home equity loan interest rates are lower than credit card rates and other types of loans.
  • Fixed interest rate. Your interest rate will be fixed for the duration of the loan term.
  • Easy application process. Apply online or in-person.
  • Relatively fast approval. Generally, two weeks to two months.
  • Loan interest may be tax deductible. According to the IRS, for tax years through 2025, if home equity loans or lines of credit secured by your main home or second home are used to buy, build, or substantially improve the residence, interest you pay on the borrowed funds is classified as home acquisition debt and may be deductible, subject to certain dollar limitations.

Home equity loan uses

What can you use a home equity loan for? The answer is anything you choose.
However, to get the most value from your loan, home equity loans should be used for updates to your home that increase its value and home equity loan uses that reduce high-interest debt or put you in better financial position. Examples of good home equity loan uses include:
  • Consolidating debt
  • Starting a business
  • Remodeling your home
  • Buying an investment property
  • Paying for college
  • Paying for emergencies and medical bills.
  • Paying for school or college
  • Paying for wedding expenses
What you shouldn't use a home equity loan for
A home equity loan is most useful for making improvements to your home that will increase its value. Other home equity loan uses include college tuition, starting a business, and paying medical bills.
Because a home equity loan is a debt tied to your home’s equity (value), if you fail to repay the loan the bank can foreclose, and you could lose your home. Therefore, a home equity loan shouldn't be used to make nonessential purchases, purchases that can depreciate, or those that could lead to further loss of money, such as:
  • Buying a car
  • Investments that may be volatile
  • Going on vacation
  • Gambling
  • Frivolous spending on non-essential items
Are home equity loans worth it?
Getting a home equity loan means taking on new debt that is secured by the equity in your home. Making purchases and payments using cash is usually the safest option if you can do so without neglecting your other financial responsibilities. Overall, a home equity loan may be worth it if you can afford the monthly payments. Failure to repay a home equity loan or missing loan payments can result in your home being foreclosed on by the lender.
Before you commit to a home equity loan be sure you really need the money.


How much can you borrow on a home equity loan?
The amount of a home equity loan you can get will largely depend on home much equity you have in your home. Loan providers offer the maximum loan amount of up to 80% or 85% on your home equity.
How long does it take to get a home equity loan?
It can take two weeks to two months to be approved for a home equity loan.
How do I build equity in my home?
There are several ways to build equity in your home, including paying a little more each month toward the principal amount. By reducing the amount, you owe, you increase equity – which is the portion you own.
Does getting a home equity loan increase my mortgage payment?
A home equity loan is sometimes referred to as a second mortgage because it’s granted based on the equity in your home and requires a monthly repayment. However, a home equity loan will remain separate from your first mortgage and not affect it in any way.
How long are home equity loan terms?
The term is the duration a loan is in effect. A home equity loan term can range from 5-30 years, depending on the lender.

How do home equity loans compare?

Here’s how home equity loans compare to other common types of loans:

Home equity loan Vs. HELOC

Home equity loans differ from home equity lines of credit in their interest rates; the former has a fixed rate while the latter has a variable rate. Moreover, the home equity plan allows you to repay the lump sum amount of money provided to you in 5-10 years. On the other hand, HELOC provides revolving credit that can be paid in 10-20 years.
Home equity loan Vs. cash-out refinance
Getting cash through a mortgage refinance requires that homeowners get a new mortgage at a new interest rate. If you have a low interest rate that is lower than the current interest rates, you’ll save more by keeping your current rate. Closing costs can be high, which makes getting cash more costly as well.
Can you use a home equity loan for anything?
Yes, once you are approved for a home equity loan the money is deposited into your account and you can use the funds for all types of purchases.

Why Savvy Consumers Choose CU SoCal

For over 60 years CU SoCal has been providing financial services, including HELOCs, car loans, personal loans, mortgages, credit cards, and other banking products, to those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County.
Please give us a call today at 866.287.6225 today to schedule a no-obligation consultation with one of our home equity loan experts.

Get Started on Your Home Equity Loan Today!

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Credit Union of Southern California (CU SoCal) is a leading financial institution empowering those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County to reach their goals and build strong financial futures. CU SoCal provides access to convenient money management services and offers competitive rates and flexible terms on auto loans, mortgages, and VISA credit cards—turning wishing and waiting into achieving and doing.


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