What can you use a HELOC for? 5 popular uses

If you own a home, you may have more borrowing power than you realize, and a HELOC could be one of the most flexible tools available to you. The range of purchases homeowners fund with a HELOC is broader than most people expect.

How a HELOC works

A home equity line of credit (HELOC) is a revolving line of credit—meaning you borrow, repay, and borrow again as often as you like, up to your credit limit—secured by your home. Because your home acts as collateral, rates may be lower than unsecured loans (those not backed by any asset). Most lenders offer variable rates on HELOCs; Achieve offers a fixed rate. Your home is used as collateral, which means your lender could foreclose if payments aren't made.

Lenders generally don't place many restrictions on how you use HELOC funds. Most borrowers use them for predictable, high-cost needs where a flexible line of credit makes sense. Here are common uses.

1. Home renovations

For many homeowners, the ability to update and improve where they live is one of the most rewarding parts of owning property. Popular upgrade options for homeowners who use HELOCs to renovate include:

• A new pool or hot tub

• An addition

• A kitchen or bath remodel

• New or remodeled landscaping and outdoor living areas

• New dedicated spaces for hobbies like woodworking or fitness

A HELOC could be a good fit for home improvements, because you borrow against your main asset to potentially increase its value.

2. Energy-efficient upgrades

Some homeowners use a HELOC to fund energy-efficient improvements to their home. Projects that could lower your energy costs over time include:

• Solar panels

• Improved home's insulation and weatherproofing

• New ENERGY STAR-rated appliances

• A heat pump HVAC system, clothes dryer, or water heater

Consider a home energy audit for starters. A trained professional will visit your home and help you identify the highest-impact upgrades for your budget. A HELOC could give you the flexibility to complete these projects on a schedule that works for you.

3. Debt consolidation

You may be able to use a HELOC to consolidate debts you've already accumulated. You would use the funds from a HELOC to pay off existing debts. Then, you only need to make the HELOC payments.

Because a HELOC is secured by your home, lenders may offer lower rates compared to unsecured options like credit cards or personal loans. This is a strategy some homeowners use to simplify repayment and reduce the interest they pay across multiple accounts.

You also have the flexibility to choose a repayment term that fits your budget. A 20-year HELOC, for example, would carry lower monthly payments than a 10-year term for the same balance.

For example, imagine you have debts on several credit cards at high interest rates. If you roll those balances into a single HELOC payment, that means you have one due date and possibly a lower rate than what credit cards charge.

If putting high-interest debt behind you is the goal, the GOOD app could help you track your progress.

4. Medical bills or emergencies

A home equity line of credit could serve as a practical backstop for major unexpected expenses. During the draw period, you borrow, repay, and borrow again up to your credit limit, which makes it a resource you may return to as needs arise.

Many homeowners also find that a HELOC could serve as a second layer of security for expenses like:

• Major car repairs

• Medical or dental bills not covered by insurance

• Veterinary emergencies

• Unexpected home repairs

• Last-minute travel to visit a sick family member

The advantage of a HELOC in this context is that, in most cases, you pay interest only on what you draw.

5. Major life events

Many homeowners use a HELOC to cover large, planned life events as well. Common examples include:

• Weddings and honeymoons

• Relocation expenses

• Elective medical procedures like LASIK or reconstructive surgery

• Construction of a guest suite or accessory dwelling unit