Posted on: 4 June 2017Share
An HELOC provides you with additional flexibility with how you finance your life. However, given how easy this money is, it is tempting to spend it. There are optimal ways that you can use an HELOC to get the best value:
Use An HELOC To Perform Upgrades And Repairs
The best way to use an HELOC is when performing home upgrades and repairs. By doing so, you will be increasing the value of your home and building wealth by using the HELOC. However, the interest from your HELOC may be tax deductible when used to perform home repairs.
Secure A Loan From Your Bank
When looking for an HELOC, one of the best places to look first is your primary bank. They will usually provide discounts to existing customers. Pay close attention to introductory offers because they eventually expire and you may be required to pay more expensive rates. A bank like Rio Grande Credit Union will make sure you get the best rate possible for your loan.
Choose A Loan With A Low Cap
The best HELOC programs are those that have low-interest rate caps. Otherwise, the HELOC will fluctuate underneath this cap. Make sure that the cap is an amount that you will be able to pay. Otherwise, your HELOC loan might go into default.
Know When You Can Cancel
Under federal law, you have three days to cancel an HELOC loan without a penalty. Your first day begins once you have received all of the disclosure documents and the notice of your right to cancel or sign the loan contract. You will then be given a "right of rescission" document that discusses your right to cancel the contract. Therefore, even if an agreement has been inked, you may choose to shop around before the three days have passed for a better deal.
Know If You Are A Good Candidate
The best time to get an HELOC is when you have a reliable income and know you can afford your payments. If you are not able to afford your payments, your lender has the power to force you out of your home. However, being forced out of your home requires that your lender undergoes foreclosure procedures. These can vary from state to state and the timing of each can also vary.
HELOCs are great for those who have poor credit. One's credit score does not play as much of a role when obtaining the loan. Also, by paying off the loan, the HELOC will improve one's credit score over time. Therefore, when used in the right situations, this is a great product.