Currently, the average homeowner has equity worth hundreds of thousands of dollars. And given that home equity loans frequently have more affordable interest rates than other options, that’s excellent news.
In light of this, a home equity loan can 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 use other choices, you can borrow relatively little amounts of money, but to access your home equity, you usually need to borrow at least $10,000.
So, the question “Is a $10,000 home equity loan worth it?” is raised by this. It isn’t always the case; there are instances in which it is.
Should you take out a $10,000 home equity loan?
Financial advisors typically don’t believe in making generalizations such as “a $10,000 home equity loan is worth it” or “a $10,000 home equity loan isn’t worth it.” It is advisable to make financial decisions after taking into account the particular circumstances involved.
Taking this into consideration, below are several situations in which a home equity loan of this amount can be advantageous to you.
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When it would make sense to take out a $10,000 home equity loan?
You might be able to reduce the cost of other loans by using a $10,000 home equity loan. Let’s take an example where you owe $10,000 on high-interest credit cards.
You could be able to consolidate your credit card debt at a lower interest rate in this situation with the help 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, that expense might be covered by a $10,000 home equity loan.
Not to mention, you can be eligible for tax benefits if you use your equity to make improvements to the house you borrowed against.
Furthermore, if you’re using a $10,000 home equity loan to improve your health, it might 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 could provide you with the money you need to pay for your medical expenses if you need to have surgery or buy pricey prescription drugs.
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When it might not be worth getting a $10,000 home equity loan
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 vacation.
Remember that the security behind a home equity loan is your house. Therefore, defaulting on these debts could jeopardize your house. As a result, it’s usually preferable to use these loans to pay for important costs as opposed to using them to finance non-essential purchases.
