What Can a Home Equity Loan Be Used For?
If you hear about “home equity loans” and have no idea what that even is – you aren’t alone! Though a very common financial option that opens up a world of possibilities to borrowers, these kinds of loans aren’t always explained in schools. Plenty of high school students wander into adulthood with no idea what a home equity loan is or how they even work! As of this year, the average first-time home buyer age is 38 – which means you could have easily gone from age 18 to 40 (long enough for your clothes to come back into style) before ever even considering a home equity loan!
And that’s what FFCCU is here for – to fill in financial knowledge and empower you to take control of your finances. Lending can feel like a frustrating, confusing maze. You want reassurance that your lender is knowledgeable and transparent: offering you the best terms possible and providing the information you need to make an informed decision. Credit unions like FFCCU are not-for-profit – and that makes creating a sustainable solution to your financial concerns our top priority.
So, let’s get into it…what’s the point of a home equity loan?!
WHAT IS A HOME EQUITY LOAN AND HOW DOES IT WORK
Most homeowners make payments on a mortgage. The great thing about homes is that their value (equity) rises as you make those payments on the principal of the home loan. House payments don’t just go towards eliminating a mortgage from your budget – this also invests dollar value into your home itself. At a certain point, that value can be accessed through a home equity loan. An older term for this is “second mortgage,” since the lender essentially holds a partial claim on your home until the home equity loan is paid off.
Otherwise, a home equity loan is like any other – you get a lump sum of cash, then make monthly payments on principal and interest, until the amount is paid off!
WHAT AM I ALLOWED TO USE THE MONEY FROM A HOME EQUITY LOAN ON?
That’s the neat part – whatever you want to! While most financial institutions will take your plans for the money into consideration when determining whether to approve a loan, it is ultimately up to you. Still, consider a home equity loan carefully! You are adding another payment to your expenses, and interest rates can vary. Applying requires a hard credit pull so be prepared to shop around in a short window of time to get rates.
WHAT SHOULD I SPEND THE MONEY FROM A HOME EQUITY LOAN ON
Now there’s the question to be asking! Especially when home equity loans offer lower rates (like the 5.99% APR* that FFCCU is offering through the end of July 2025) they present an opportunity to reconsolidate existing debt into a sometimes much lower rate! They also empower you to make strategic choices about your home’s value. Or the funds from a home equity loan could fuel a once-in-a-lifetime experience:
DEBT CONSOLIDATION
One popular option is to pay off credit card debt – especially for a high-interest rate card. With the average credit card interest rate in 2025 hovering around 23% this can be a huge savings. For a homeowner who put blood, sweat, and cash into their house, this can be a great way to find relief from enormous monthly payments. Fortunately, there are great credit card debt consolidation options even if a home equity loan isn’t the right fit for you.
HOME RENOVATION AND REPAIR
Your home equity loan can also stay within the home! One way to drive up the value of your house is with practical, evergreen, or desirable modifications and features. Your funds could handle renovation, repainting, and additions to your existing home that will boost its selling value. Similarly, wear-and-tear over time or a sudden crisis might result in major damage to your home. If homeowner insurance won’t cover the costs, a home equity loan can be applied to restore your home to a former – and even better state! Improving a living space is a common use for a home equity loan.
WHAT CAN A HOME EQUITY LOAN BE USED FOR WHEN YOU ARE A TRAVELER?
Have a case of wanderlust or endlessly toying with a dream vacation? This is another goal you can reach! Travel expenses are ratcheting up, whether you are taking land, sea, or air, keeping your adventure aspirations further out of reach. A sensible, low-interest home equity loan is often a more cost effective, and more reliable route to pay – especially compared to other options like the “buy-now-pay-later” that airlines, hotels, and other travel entities offer.
STUDENT LOAN FREEDOM
The average interest rate for student loans in 2025 varies wildly, but generally it’s between 7% and 17%! That’s staggering especially when you consider how much more continuing education costs compared to even a few years ago. Expect those amounts and percentages to get higher for graduate school, too. At a certain point, your student loans might be more burdensome than a home equity loan of the same amount. While it can depend on how much you owe and a number of other factors, consider what a low-rate home equity loan might do to ease the weight of educational debt.
WHAT CAN A HOME EQUITY LOAN BE USED FOR – OPENING UP YOUR FUTURE
There you have it – a whole trove of ideas to rewrite your future and make aspirations a reality! Whether you want to go out and “touch grass” (as the kids say) or give yourself an even better reason to stay inside, take the wealth you’ve built and transforms it into a powerful tool for funding your hopes and dreams!
You can get started today in whatever way is most comfortable to you – walk into any FFCCU branch, reach out to us via live chat at ffcommunity.com, apply online, inquire by email at communications@ffcommunity.com, or even give us a call at 216.621.4644! We’re ready to get started with your application today!
*APR = Annual percentage Rate. Terms and conditions apply. Promotional rate of 5.99% APR is valid only through July 31, 2025.
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