If you’re a homeowner who’s not taking advantage of your home equity, you could be letting a very valuable financial tool go untapped.
Over the past few years, rising home values have created a significant opportunity for homeowners. According to Cotality, a leading global property information, analytics, and data-enabled solutions provider, the average U.S. homeowner with a mortgage had approximately $299,000 in home equity. That’s a big chunk of change you could be taking advantage of!
And more and more homeowners are doing just that through home equity lines of credit (HELOC). When it comes to HELOCs, most people think of home renovations like kitchen upgrades and backyard glow-ups, but that’s just one way they can be used. These days, homeowners are using HELOCs in all kinds of creative and practical ways.
So let’s take a look at some of those smart ways homeowners are using HELOCs!
Key Takeaways:
- Home equity can be a powerful financial tool when used intentionally.
- HELOCs aren’t just for remodels, they can support a range of financial goals.
- Lower interest rates make HELOCs a smart option for consolidating high-interest debt.
- A HELOC can help you invest, plan ahead, or handle life’s big moments.
- The best results come from having a clear plan and using it responsibly.
Related: Unlocking Your Home’s Equity with a HELOC in Salem OR
1. Consolidating High-Interest Debt
If your credit card balance has been sticking around longer than you would like, you are not alone.
According to the Federal Reserve, the average credit card interest rate was just over 21% in 2025. If you struggle to pay your credit card bills on time, that kind of interest can really eat into your finances.
This is the first way a HELOC can come in handy.
Because it’s secured by your home, a HELOC often comes with a lower interest rate than credit cards. That means you could roll multiple balances into one and potentially save money on interest.
You’ll still need to pay off your debt, but with a lower interest rate, you can save money over time and put more toward your balance. Not only that, but if you consolidate more than one balance, you’ll only have one monthly payment to make which makes it much easier to manage your finances.
Related: Debt Consolidation vs Debt Management: Which Is Right for You?
2. Investing in Rental or Income Properties
Some homeowners are taking their equity and turning it into an opportunity to earn more.
In 2021, 42% of homebuyers agreed that buying a home is a better investment than stocks. Many homeowners go beyond their primary residence and buy a second property to rent out, flip, or even use as a vacation home to sell for more at a later date.
In these cases, a HELOC can help with:
- Down payments on rental properties
- Renovations that increase rental value
- Short-term funding while getting started
Buying a second property opens the door to long-term wealth building, and if you rent it out, the rental income can help you cover the costs. Property values also tend to grow over time, and depending on the area you’re purchasing, you can make a significant return on your investment in a few years.
Just remember that real estate is not always smooth sailing. You’ll have to plan for things like vacancies and maintenance. For many people, however, investing in a second property is a step toward putting their money to work instead of letting it sit on the sidelines.
3. Covering Education Costs
One of the most meaningful investments you can make is in education. Whether you want to invest in your own education or put a child through college,but it can also be a pricey one.
The average tuition and fees per year at public four-year in-state colleges for undergraduate students is $11,950; for out-of-state colleges, it’s $31,880. For private schools, those numbers climb quickly.
Some families are using HELOCs as an alternative to student loans. The interest rates may be lower than private student loans, you can borrow only what you need, and repayment is often more flexible.
That said, this option comes with responsibility. Unlike student loans, there are no built-in forgiveness programs, and your home is part of the equation. It is important to weigh the pros and cons carefully.
4. Creating a Financial Safety Net
As much as we may plan for life, it can always throw us a curveball. When it does, a HELOC can act as a backup plan for those unexpected moments. Only 47% of Americans have enough liquid funds to cover $1,000 of emergency expenses.
The nice thing about a HELOC is that you only pay interest if you use it. In these cases, having access to extra funds can bring you peace of mind. It’s kind of like insurance; you may not need it, but if you ever do, you’ll be glad you have it.
5. Starting or Growing a Small Business
If you have ever dreamed of starting your own business, you know that getting started often comes down to one thing: funding.
Some homeowners are using HELOCs to bring their ideas to life. In the U.S., 99.9% of all businesses are small businesses, so you’ll be in good company.
You can tap into your HELOC to help cover startup costs, equipment or inventory, or early operating expenses, and bring your business dreams to life.
Unlike traditional small business loans, you’ll likely have faster access to the funds you need, and you could also have potentially lower interest rates. Just remember that every business venture comes with risk, so this is one area where a solid plan is key. Make sure to do your homework and develop a strong business plan. Still, for many entrepreneurs, it is a way to turn a “what if” into a “why not.”
Related: A Guide to Starting Your Business in Salem, Oregon
6. Navigating Retirement with More Flexibility
Retirement is all about enjoying the life you have worked hard to build. A HELOC can play a supporting role in making that possible.
Some retirees use a HELOC to manage cash flow, especially during market dips. Instead of pulling money from investments at a less-than-ideal time, they can tap into their equity temporarily.
Avoiding withdrawals during market downturns can help extend the life of a retirement portfolio. In this way, a HELOC can help you protect long-term growth by giving you more control over when you withdraw from investments.
Like any good plan, this works best when it is part of a bigger financial picture.
7. Funding Life’s Big Moments
Some moments in life are simply too important to put on hold. Whether it is a wedding, a move, or helping a family member, a HELOC can provide a flexible way to cover major expenses. Having a line of credit you can borrow from when needed can help you make room for life’s big moments while still keeping your long-term goals in sight.
FAQs About Using HELOCs
Is a HELOC a good idea for debt consolidation?
A HELOC can be a smart option for debt consolidation, especially if you’re dealing with high-interest credit cards. Because HELOCs typically have lower interest rates, you may be able to save money and simplify your payments.
Should I use a HELOC to pay off debt?
Using a HELOC to pay off debt can make sense if it helps you lower your interest rate and create a clear payoff plan. That said, it’s important to remember that your home is used as collateral.
Can you use a HELOC for anything?
In most cases, yes. A HELOC is a flexible line of credit that can be used for a wide range of expenses, from home improvements to education, business costs, or even emergency expenses. It’s all about using it wisely and with a clear purpose in mind.
Does a HELOC balance affect your credit score?
Yes, a HELOC balance can affect your credit score. Like other forms of credit, it factors into your credit utilization and payment history. Making on-time payments can help your score, while carrying a high balance or missing payments can have the opposite effect.
How can you use a HELOC to make money?
Some homeowners use a HELOC to invest in opportunities that may generate returns, such as rental properties, home improvements that increase value, or even starting a business. While this can be a smart move, it’s important to weigh the risks and have a solid plan in place.
How should you shop for a HELOC?
When shopping for a HELOC, it’s a good idea to compare interest rates, fees, draw periods, and repayment terms. You’ll also want to look at lender reputation and customer service. A local credit union can be a great place to start if you’re looking for personalized guidance and competitive rates.
Is it smart to use a HELOC to invest?
Using a HELOC to invest can be a strategic move. Just remember that since you’re borrowing against your home, it’s important to be confident in your investment and prepared for potential ups and downs. This approach tends to work best for experienced investors with a clear strategy.
The Best Way to Use a HELOC Is Whatever Works for You
If there’s one thing to take away from all of this, it’s that there’s no single right or wrong way to use a HELOC.
Some homeowners use it to simplify their finances. Others use it to invest, plan ahead, or take care of life’s bigger moments. The smartest approach is the one that aligns with your goals, your comfort level, and your plan to pay it back.
That’s really what it comes down to. Not just access to funds, but having a clear reason behind how you use them.
If you’re considering a HELOC, it’s worth exploring your options with a team that’s focused on helping you make the best decision for your situation. At Valley Credit Union, we’re here to talk it through, answer your questions, and help you feel confident every step of the way.
And right now, with HELOC rates as low as 7.50% APR, it could be a great time to put your home equity to work in a way that makes sense for you. Feel free to contact us if you have any questions you may have.
About the Author
Justin Roberts, Vice President of Lending
Justin Roberts is our Vice President of Lending and has been in the financial industry for over 18 years. He is an Oregon State University Graduate and has just completed Western CUNA Management School. When he is not focused on helping the members at Valley, you will find him coaching his two sons and volunteering his time to help develop the youth in our communities through sports.