Are HELOCs a Smart Way to Pay for College?
When most people think about a Home Equity Line of Credit (HELOC), it’s for tackling home improvement or saving money by consolidating debt. However, transforming your home’s value into a line of credit can also be a powerful financial resource when it comes to paying college tuition and the costs associated with higher education.
Benefits of Using A HELOC to Pay Tuition Costs
For many people, their home is not only their largest investment, but also their greatest asset when it comes to addressing a financial need. Backed by the value of your home, a HELOC provides a competitive, flexible lending alternative to other means of education financing.
Depending on the financial aid offered by your student’s college, there are often tuition and other expenses that are not covered by aid alone. In these cases, it’s common to rely on other student lending options such as private student loans, Parent PLUS loans, or even loans against your retirement. While helpful when needed, these student loan types can often carry much higher interest rates. On the other hand, a HELOC offers the peace-of-mind that comes with knowing that your child’s education costs are covered at a potentially lower rate with more flexibility when it comes to your loan terms.
Add Flexibility to the ‘Paying For School’ Equation
As student loans have become notorious for their lengthy repayment period, changing interest rates, and a variety of other hassles, one considerable benefit of using a HELOC as an education funding option is knowing your loan terms can be flexible to fit your financial goals.
With low rates, competitive terms, and a local team here at Call Federal to help you along the way, you can feel relieved knowing the cost of tuition is covered without many of the fees and extensive long terms of traditional student lending.
How To Get Started
If you find that a HELOC is a good option for you and your higher education needs, here are a few things to have handy to make the simple qualifying process go even smoother:
- Your Credit Score – A minimum credit score of 650 is needed to qualify for a HELOC.
- Appraised Value of Your Home – While many HELOC applications do not require a full appraisal, gathering the latest appraised value of your home allows us to better assess your available equity.
- Your Most Recent Mortgage Statement – Knowing how much you owe will help in evaluating the available equity in your home.
- Debt-to-Income Ratio – 43% or lower is required to qualify for a HELOC. Our Money & Beyond portal has a page to help you calculate this number.