Currently, the average homeowner has equity worth hundreds of thousands of dollars. And given that home equity loans sometimes offer more affordable interest rates than other choices, that's excellent news. In light of this, a home equity loan might be the best option for you if you need a loan and want an interest rate that is competitive. (Photo : by Justin Sullivan/Getty Images)
Currently, the average homeowner has equity worth hundreds of thousands of dollars. And given that home equity loans sometimes offer more affordable interest rates than other choices, that's excellent news. In light of this, a home equity loan might be the best option for you if you need a loan and want an interest rate that is competitive.
There is a trade, though. When you utilize other choices, you may borrow relatively little sums of money, but to access your home equity, you usually need to borrow at least $10,000. That raises the question, "Is a $10,000 home equity loan worth it?" in certain situations, but not in others.
Is It Worth It?
In the financial industry, it is typically not adequate to make generalizations such as "a $10,000 home equity loan is worth it" or "a $10,000 home equity loan isn't worth it." The finest financial judgments are those that take into account the particular conditions around them. In light of this, below are several situations in which you could find a home equity loan in this amount useful or not.
If you're utilizing a $10,000 home equity loan to pay off other obligations, it can be worthwhile. Let's take an example where you owe $10,000 on high-interest credit cards. You may be able to consolidate your credit card debt at a reduced interest rate in this situation with the aid of a $10,000 home equity loan, which would result in significant short- and long-term savings.
If you have repairs to make to your house, a $10,000 home equity loan can be a suitable option. Let's take the case of a leaky roof. Angi reports that the average cost of replacing a roof is $9,398. Therefore, the expense may be covered by a $10,000 home equity loan. Not to mention, you can be eligible for tax benefits if you utilize your equity to make improvements to the house you borrowed against.
Furthermore, if you're utilizing a $10,000 home equity loan to improve your health, it could be worthwhile. Let's take an example where you have a high deductible health plan and you are unable to pay your deductible with cash. A $10,000 home equity loan might provide you with the money you need to pay for your medical expenses if you need to have surgery or buy pricey prescription drugs.
While there are situations in which obtaining a $10,000 home equity loan could be advantageous, there are other instances in which it is probably not the best course of action. You wouldn't want to take out a $10,000 home equity loan if you couldn't afford the installments.
A 15-year home equity loan has an average interest rate of 8.75%. A $10,000 home equity loan with a 15-year term would come with monthly payments of $99.94 at such rate. Therefore, if you are unable to afford an additional $100 a month, a $10,000 home equity loan would not be worthwhile.
It's also important to remember that paying for non-urgent things with a $10,000 home equity loan might not be worthwhile. For instance, a home equity loan might not be the greatest choice if you want to purchase a new automobile or go on an expensive trip. Remember that the security behind a home equity loan is your house. Therefore, defaulting on these debts might jeopardize your house. As a result, it's usually preferable to utilize these loans to pay for important costs as opposed to using them to finance non-essential purchases.
The content provided on MoneyTimes.com is for informational purposes only and is not intended as financial advice. Please consult with a professional financial advisor before making any investment decisions.
