Home equity lines of credit are a proven and smart way to access money to pay down debt or fund things like business ventures, home renovations or medical needs. Often with life, there is more than one expense, which means managing your HELOC so that it remains under control and helping as opposed to hindering.
You Need to Know Where Your Money is Being Spent
A lot of borrowers use a HELOC to pay off their monthly credit cards to enjoy a lower interest rate. This also allows them to collect any reward points that their credit cards offer. Never incur debt for reward points but there are positives if you manage it properly.
It’s advisable that you review your monthly credit card statements to understand where your line of credit is being spent.
Prioritize Where your Money is Being Spent
What’s more important:
- Paying down debt
- Increasing the value of your home
- Paying off a semester of tuition
- Taking a vacation to celebrate your retirement
These are common uses for a HELOC. Granted, taking a vacation should probably be slotted near the bottom of the list, but you still need to rank your priorities and make sure the most important items are getting paid first.
Managing Multiple Expenses
A HELOC can get spent very quickly especially when it’s funding multiple big ticket items like medical treatments, a post-secondary education and/or home repairs or renovations.
If this is the case, you need to create a more aggressive repayment plan to ensure that your line of credit doesn’t get the better of your finances.
Automatic Payments can be Helpful
Automatic payments are a way to make sure you that you don’t miss a payment amid your busy life. It can help keep your credit score up and make one of life’s least pleasant tasks—bill paying—less complicated.
Prioritizing the management of your HELOC should be the first thing you do post-approval. Input everything into a spreadsheet including the total and monthly costs, and manage it so that you don’t end up over your head.