Emergencies

• Typically, lenders only write loans against houses that are in good condition. You may not take out an equity loan to replace a roof lost in a storm because lenders do not want to secure a loan against a home in need of major repairs. However, many homeowners establish equity lines of credit purely for use in emergencies. You do not have to draw on the line until you need it. Therefore, if your home sustains storm damage or you encounter another kind of emergency, you may draw on your line and begin repairs on your home without having to wait for your insurance company to process your claim.
  
  

Home Improvement

• If you own an investment property and plan to sell it, you may sometimes significantly raise the property value with repairs and refurbishments. The cost of refurbishing a home often amounts to much less than the value the improvements add to the property. You may extract equity from the property by taking out an equity loan. This means you are borrowing against an asset to raise the value of an asset. This simplifies your finances.
  
  

Debt Consolidation

• Generally, banks charge the lowest rates on loans that have the strongest collateral. Consequently, you usually pay the highest rates on unsecured loans, such as credit cards. You may drastically reduce the interest on your debts by consolidating credit cards and high interest rates loans into a home equity loan. Do this if, however, only if you can afford to make the home equity payments; you could lose your home if you default on the equity loan.
  
  

Major Expenses

• Lenders are reluctant to lend large sums of money to you without some form of collateral unless you have very high income and excellent credit. This means many people struggle to find financing for big expenses such as weddings, college fees, vacations and medical bills. If you have equity in your home, you may qualify for an equity loan as long as your have enough income to cover your debts and a good but not necessarily excellent credit score. A home equity loan, for many people, is the only way to borrow large sums of money.