Top 5 Creative Ways to Use a HELOC (Without Risking Your Home)
September 22, 2025
Admittedly, the headline above is a bit of a tease. A home equity line of credit (HELOC) is always collateralized by your home. In other words, there is risk involved. If you borrow money using a HELOC and don’t repay, you could, in fact, lose your home. However, there are some uses of a HELOC that will greatly minimize that risk. That’s what this article is all about.
What is a HELOC?
Before we get into the details, let’s define our terms. A home equity line of credit gives you access to a portion of the equity in your home. You don’t receive money up front, as you would with a home equity loan. Instead, if you are approved for a HELOC, you can borrow some of your home’s equity on an “as needed” basis. You will pay a small annual fee to maintain the HELOC, and if you do, in fact, borrow money through the HELOC, the interest rate will be variable.
The best uses of a HELOC
- Affordability
The best use of a HELOC isn’t tied to a specific purpose; it’s about an overarching approach to borrowing. Before tapping the line of credit, find out how much your monthly payments will be for the amount of money you plan to borrow. Then, make sure you can afford them! That means being able to make the monthly loan payment without hindering your ability to give generously and save and invest adequately. If you can do that, borrowing money through a HELOC should not pose a risk to your home.
- Real Estate
As for more specific uses of a HELOC, the most financially advantageous ones are to remodel your home or to buy or build a second home. There are two main benefits. First, borrowing money to remodel or purchase a home has a high likelihood of becoming a profitable investment. Improvements to your home may boost its value just as an investment property may grow in value over time.
The second benefit to using a HELOC for home-related purposes is that the interest may be tax-deductible. In fact, these are the only purposes for which that’s possible. There is one important caveat, though: You have to itemize your tax deductions and follow certain other rules in order to take advantage of this benefit. Among the rules, the interest is deductible on a maximum of $750,000 of all mortgage debt (a first loan and the HELOC) for married couples filing taxes jointly.
- Education
A HELOC can be a better choice for college expenses than a student loan, as the interest rate may be lower, especially when compared with a private student loan. If you are making an investment in your own education, that may boost your earning potential.
- A business venture
If you are starting a business, it will likely be easier to obtain a HELOC than a small business loan. While business ventures are not without risk, there is potential to create a new income stream and build wealth.
- Debt consolidation
Using a HELOC to pay off high-interest credit cards or other debt might make sense under certain circumstances. Doing so will likely reduce your monthly interest payments. Just be sure to have addressed the underlying causes of the debts you’d like to consolidate and commit to not taking on any new debt as you pay off the HELOC.
Necessary caution: If you plan to sell your home in the near future, you may want to avoid borrowing against its equity. That’s because if you sell your home while owing on a home equity loan or line of credit, you will be required to pay off that debt before selling or at closing.
Click here to learn more about obtaining a HELOC from CCCU.
Matt Bell is the author of Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management. He speaks at churches and conferences throughout the country and writes the MattAboutMoney blog.
This article should not be considered legal, tax, or financial advice. You may wish to consult a tax or financial advisor about your individual financial situation.
