5 Uses for a Home Equity Line of Credit

Financing major life events or home projects can run you dry on cash, but you might be able to get a loan based on one of your own assets: your home. A home equity line of credit, or HELOC, gives you flexibility in borrowing money over time at variable rates, much like a credit card.

Unlike a credit card, though, the loan uses your home as collateral, so not making payments can put you at risk of foreclosure. On the other hand, since it’s a secured loan, the interest rate tends to be low. Also, the interest that you pay is tax-deductible in many situations. As long as you’re able to pay it back monthly, this kind of loan can be a good way to finance any of the following objectives:

1. Debt consolidation

If you’re tangled in debts from credit cards to student loans, you may be able to pay them all off using a HELOC. This can streamline your payments and reduce your monthly interest costs. How much you can borrow depends on your equity, or the difference between your home’s market value and any mortgage debt you have. You can get lines of credit for up to 90% of your equity at lenders like Hopewell Federal Credit Union.

2. Home improvements

One common use of a HELOC is improving your home when you want to tackle a series of small projects. Rather than coming up with a master budget and borrowing a lump sum, a HELOC gives you the flexibility of taking money as needed. That lets you focus on each project separately, which can help you prioritize the ones with the best return. For example, the national average cost of a minor kitchen remodel, which includes touching up cabinets and replacing flooring and some appliances, is just under $20,000, according to Remodeling magazine. However, almost 79% of the cost may be recovered if you sell the home in the near future.

3. Unexpected medical expenses

Instead of putting a hefty medical bill on a credit card, you could use a HELOC. The interest you pay can be tax-deductible, which can help ease the financial impact.

4. College education

If you want to go back to school or pay your children’s college costs, a home equity line of credit can let you finance education at a generally low interest rate. Plus, if you’re not sure how long you’ll be in school, the period for drawing money from a HELOC can be up to 10 years.

5. Weddings
From the cost of the venue to a wedding planner’s fee, matrimony doesn’t tend to come cheap. The national average cost of a wedding in 2014 came to just under $38,000, according to a recent study. Since the costs can vary widely, you can take various amounts out of a HELOC gradually.

From managing debts to paying wedding costs, a home equity line of credit can help you finance different aspects of your life. The flexibility and immediate access make this loan a valuable option to consider.

Spencer Tierney, NerdWallet

Avoid Scholarship Scams

When you think about scholarships, scam is the last word that comes to mind. But some people and companies would like to trick you into paying a fee to enter a scholarship contest or steal your financial information via an e-mail request to deposit scholarship money you’ve won but for which you’ve never applied.

Sharpen your scholarship detection skills by understanding how these scams work, and you’ll be better able to spot legitimate scholarships.

“Everything that requires a payment, I throw…away,” says Bob Bardwell, director of guidance and student support services at Monson High School, Monson, Mass. A scholarship that requires a payment isn’t necessarily a scam, but Bardwell believes students shouldn’t have to pay fees.

If you decide to apply for a scholarship that has a fee, or if you haven’t heard of the organization offering it, check out the company carefully. Be wary of grandiose promises, and don’t provide information the outfit could use for identity or cash theft.

“Never give out account information, your Social Security number, or credit card information for any reason,” says Bardwell. “Legitimate scholarship applications do not require this sensitive information.”

If an organization seems legit, but you haven’t heard of it before, proceed with caution and perform extra research. “Check with the Better Business Bureau to see if complaints have been filed against the scholarship organization,” Bardwell says. “Ask for a list of previous recipients of the scholarship or, if that is not available, colleges to which a scholarship was disbursed in the past.”

When you have any doubt about a scholarship’s legitimacy, ask people you trust to help you decipher fact from fiction. With the help of your school counselor, parents, and university financial aid officers, you can apply for the scholarships you’re more likely to receive and avoid potential scams.

Hopewell Federal Credit Union offers a $1,000 scholarship.  Click here for details.

Give Your College-Bound Student a Crash Course in Personal Finance

Does your young-adult student need a crash course in personal finance? A financial literacy survey by the National Foundation for Credit Counseling (NFCC) reveals that the majority of adults say they learned the most about personal finance from their parents.

Parents: Compliments of the NFCC, here’s a checklist of basic knowledge that will benefit everyone managing his or her own money:

* Budgeting: Be clear with yourself and with your student about how much money is available for expenses. Help him create a workable monthly budget that balances income, loans, and gifts with anticipated expenses. This discipline is a skill that will pay benefits for a lifetime.

* Recording financial transactions: Show your student the importance of recording all transactions in a check register or monitoring online, tallying the running balance daily, and balancing financial statements every month. Tracking expenses might reveal some surprises (60% of your income is spent on dining out?) and provide opportunities to change direction.

* Using credit: Tell your student why it’s important to commit to paying each credit card bill in full and on time each month. By using credit wisely, she will be learning how to live within her means while creating a positive credit file that could help when buying a car, renting an apartment, obtaining insurance, and even landing a job.

* Getting financially organized: Help your student commit to keeping all financial records, bills, and bank statements in one location. This will help ensure that he will pay bills on time, avoid late fees, and keep an unblemished credit score.

* Recognizing the dangers of Identity theft: Discuss forms of identity theft, the kinds of personal information that need to be protected, and how to protect them—even, and especially, from friends and roommates. Discuss the pitfalls of careless, unprotected use of social media.

Remember, too, that your departing young adult is still eligible for Hopewell Federal Credit Union membership. Our low-cost, high-quality services will give any member a leg up on personal finances. The staff members at Hopewell Federal are valuable resources.