If you have a large purchase in your future, you may worry about how you are going to pay for it. Instead of taking out a new credit card or draining your savings account, consider taking out a home equity line of credit, also known as a HELOC. HELOCs have several advantages that make them ideal for financing large purchases.

1. You Can Use Your HELOC for Any Type of Expense

One of the advantages of a HELOC is you can use the money for literally any type of purchase. You can take an advance from the HELOC, deposit the funds into your checking account, and spend the money as you see fit. Or, if you prefer to pay a business or retailer directly, you may be able to write checks that draw the funds directly from the HELOC.

Vacations, home repairs, tuition, and new vehicle purchases are just a few items that you might decide to pay for with your HELOC. Some individuals also use their HELOCs to pay down expensive consumer debt, like credit cards, payday loans, and unsecured personal loans.

2. Your HELOC's Interest Rate is Competitive

The HELOC remains a popular financing tool due to multiple reasons, one of which is the affordable interest rate. HELOCs are secured by the equity in your home. Since you have collateral to secure the money you are borrowing, your lender is able to offer a competitive rate of interest. The interest rate for a HELOC tends to be much more affordable than those associated with credit cards.

Your interest rate will ultimately vary based on a few factors, including your credit score, ability to verify your income, the amount of equity you have in your home, the current interest rate environment.

3. If You Don't Need Your Entire HELOC, It Will Stay Available Until You Do Need It

One of the best characteristics of a HELOC is that the credit stays available for you to use for an extended period of time. For example, assume that your bank approves you for a HELOC of $30,000. You need $10,000 for home repairs; after spending this money, you still have $20,000 left on your HELOC. If you don't need the funds right away, just keep the HELOC open until you do need the money.

4. You Can Refinance Your HELOC

If interest rates or your current financial situation changes, you can refinance your HELOC into another loan product. You can roll it over into another HELOC, or you can combine the HELOC and your first mortgage into a new mortgage. 

Talk with a company like Rio Grande Credit Union for more information today.