At Achieve, we're committed to providing you with the most accurate, relevant and helpful financial information. While some of our content may include references to products or services we offer, our editorial integrity ensures that our experts’ opinions aren’t influenced by compensation.
Home Equity Loans
Ways to use a home equity loan
Updated Apr 15, 2026
Written by
Reviewed by
Key takeaways:
Equity is the difference between what you owe on your home and what your home is worth.
Home improvements and debt consolidation are two common reasons homeowners borrow against equity.
Lenders place few restrictions on how home equity loan funds are used.
If you own a home, you have funding options for your next big goal. The equity (the difference between what your home is worth and what you still owe on your mortgage) you've built up over time may already be the resource you've been looking for.
A home equity loan may put that equity to work for you, often at a lower rate than credit cards or other unsecured borrowing options. Here's how to use one wisely.
A home equity loan is a way for you to borrow a one-time loan amount against the equity in your home. A home equity loan typically carries a fixed interest rate and predictable monthly payments over a set term. Because your home serves as collateral, you may access lower rates than unsecured borrowing options, such as credit cards or personal loans
Three common uses for a home equity loan
Home equity loans are flexible. A car loan, for example, is only for a car. With a home equity loan, you decide how to use the funds based on your financial priorities.
Here are three common uses.
1. Consolidate debt
A home equity loan may help you address high-interest debt faster and reduce what you pay in interest over time.
Imagine you have $20,000 in high-interest credit card debt. If you could access a home equity loan at a lower interest rate than what your credit card carries, you might pay off that balance faster and pay less in interest over the life of the loan.
2. Home improvements
Renovation projects make your home feel more like your own. The right upgrades may also increase your home's value.
As a homeowner, you'll occasionally need to make repairs to keep things running. The water heater, the HVAC system, the roof—these are all significant expenses that could strain any budget and often arrive without much warning. A home equity loan may be a way to fund them.
Think about what's next for your home. A remodeled kitchen. An added room. Upgrades that make your space work better for your family. Home equity financing may help you get there without depleting your savings.
3. Major purchases
You have a home, and you may need things to go in it. Are any of these on your list?
New appliances
New furniture
Smart home upgrades
Home security system
Electronics or a home theater
These are all expenses you might fund with a home equity loan. When you borrow against your home, that loan typically comes at a lower cost than when you carry a balance on a credit card or store charge card.
More ways to use a home equity loan
Here are three other situations where a home equity loan may come in handy.
4. Medical expenses
Health care costs can be significant, even with insurance. A single medical event may leave you with substantial bills. A home equity loan is one way to address those costs.
5. Financial emergencies
Life comes with unexpected expenses, large and small. A job change you didn't plan for. A car repair that can't wait. A home equity loan may cover a major repair or unexpected expense so you might be able to get back on your feet sooner.
6. Plan a wedding
When someone you love announces they're getting married, the excitement arrives alongside a real question: how do you fund a celebration?
Even a modest wedding involves some big costs. A home equity loan may be a practical source of funding when the numbers add.
When a home equity loan may not be the right fit
A home equity loan works best in specific situations. It may not make sense if:
You want to consolidate debt but you don’t qualify for a rate that’s lower than what you currently pay
Closing costs would offset the financial benefit
Your income is unstable or long-term repayment feels uncertain
You’re looking for a way to cover lifestyle expenses such as travel
Speak with a loan consultant before committing.
Home equity loan vs. HELOC
If you're weighing your home equity options, it helps to understand how a home equity loan compares to a home equity line of credit (HELOC). The two are often confused, but they are not the same.
Feature | Home equity loan | HELOC |
Structure | One-time loan | Credit line |
Rate | Usually fixed | Variable or fixed |
Best for | One-time expense | Ongoing or flexible borrowing |
A home equity loan tends to work well when you know exactly how much you need and want a predictable payment. A home equity line of credit may be a stronger fit if your expenses are spread over time or you want flexibility in how much you draw. Most lenders offer variable-rate HELOCs. Achieve offers a fixed-rate HELOC, which means your rate stays consistent over the life of the line.
Author Information
Written by
Rebecca is a senior contributing writer and debt expert. She's a Certified Educator in Personal Finance and a banking expert for Forbes Advisor. In addition to writing for online publications, Rebecca owns a personal finance website dedicated to teaching women how to take control of their money.
Reviewed by
Kimberly is Achieve’s senior editor. She is a financial counselor accredited by the Association for Financial Counseling & Planning Education®, and a mortgage expert for The Motley Fool. She owns and manages a 350-writer content agency.
Frequently asked questions
In most cases, lenders place few restrictions on how home equity loan funds are used.
You may be able to use a home equity loan to address high-interest debt, if you apply for and receive a lower rate and the new loan helps simplify your finances. This is a common strategy for consolidating unsecured debt into secured debt tied to your home.
A home equity loan is a mortgage. Equity—the difference between your home's current value and what you still owe—serves as the basis for the loan. You pledge your home as collateral, which is why rates may be lower than unsecured borrowing options like personal loans. You repay the loan with interest according to a schedule set by your lender.
A home equity loan works similarly to your primary mortgage. The lender verifies your income and orders a property appraisal. At closing, you receive a one-time loan amount at a fixed interest rate, with a set repayment schedule. This predictability is one reason homeowners choose a home equity loan over other borrowing options for one-time expenses.
The amount available through a home equity loan depends on how much equity you have and the lender's requirements. Lenders calculate your combined loan-to-value ratio, or CLTV—the total of all loans on the home compared to what it's worth. Loan amounts also reflect your credit profile and income.
Related Articles
A home equity loan lets you borrow against the equity in your home with a fixed rate and fixed monthly payments. Learn how a home equity loan works.
A home equity loan is a way to get cash from your home’s value without selling it. They can have much lower interest rates and affordable monthly payments. Learn more...
A fixed-rate HELOC combines the best traits of HELOCs and home equity loans, but most lenders don’t offer it. Learn how it works and how to get one.
A home equity loan lets you borrow against the equity in your home with a fixed rate and fixed monthly payments. Learn how a home equity loan works.
A home equity loan is a way to get cash from your home’s value without selling it. They can have much lower interest rates and affordable monthly payments. Learn more...
A fixed-rate HELOC combines the best traits of HELOCs and home equity loans, but most lenders don’t offer it. Learn how it works and how to get one.