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Smart Ways to Use a HELOC

If you’ve built up equity in your home, you might be sitting on one of the most flexible financial tools available: a home equity line of credit (HELOC). This revolving credit line allows you to tap into your home’s value — often at a lower interest rate than credit cards or personal loans.

But like any financial tool, how you use it matters. A HELOC isn’t free money, and you’re putting your home at risk if you can’t pay it back. That’s why savvy borrowers use HELOCs to cover costs that strengthen their financial position in the long term, like education, business opportunities, or better borrowing terms.

Here are some practical, financially sound ways to use a HELOC.


1. Pay down high-interest credit card debt

One impactful way to use a HELOC is eliminating high-interest credit card debt.

The average credit card interest rate is around 21%.1 In contrast, HELOC interest rates typically range from 6% to 10%,2 depending on your credit score and lender. (Check out Synovus' competitive rates.)

Say you have a credit card with a $20,000 balance and a 21% annual percentage rate (APR). If you pay $500 per month, it would take you more than five years to pay off the balance, and you'd pay more than $12,000 in interest. (Consolidate debt with our home equity calculator.)

Alternatively, let's say you borrowed $20,000 with a HELOC at 8% APR with a 5-year repayment term. Your monthly payment would drop to $406, and you’d pay around $4,332 in interest. If you stretched the repayment term out to ten years, you'd pay $243 per month and a total of $9,112 in interest.

By consolidating credit card debt into a HELOC, you can reduce your interest rate, lower your monthly payment and potentially pay off balances faster to free up cash for other priorities.


2. Make home improvements

Using a HELOC to finance home improvements can be a smart move when you choose projects that add lasting value to your property.

According to the Journal of Light Construction’s 2024 Cost vs. Value Report for the South Atlantic region,3 some smaller home renovations recoup their cost or even make money when you sell the home. With others, you'll recoup most of your cost when you sell. In the meantime, you'll get to enjoy the improvements while you live there.

For example, replacing a garage door returns an impressive 189.5% of the investment, while a minor kitchen remodel yields around 86.7%. The right upgrades can boost your home's desirability and may help you to sell it more quickly when the time comes.

If you're thinking of moving, a HELOC can help you get your home ready to sell. Projects like exterior paint touch-ups, siding replacements, or a new front door will freshen up your property, attract more buyers and potentially lead to a quicker sale. While these investments might not return every dollar spent, well-chosen updates could mean fewer days on the market and stronger offers.

If you use your HELOC funds specifically for home improvements, your interest may be tax-deductible, provided you itemize deductions and the improvements substantially improve the property.4

Plus, significant improvements increase your home’s basis, potentially reducing your taxable capital gain when you sell.5 Always consult a tax advisor to understand how this applies to your situation.


3. Buying a Used Car

Financing a used car often comes with higher interest rates than expected — especially if you have less-than-perfect credit.

While new car buyers frequently qualify for low promotional rates, the average interest rate for a used car loan is 11.74%.6

What may surprise you is how your auto-specific credit score — typically the FICO Auto Score — impacts your rate. This score weighs your history of paying back car loans more heavily than other factors.7 If you previously paid cash for vehicles, you may lack the credit history to secure the lowest available rates. And with used car prices still up 31.4% from pre-pandemic levels,8 you may find that paying cash isn’t feasible anymore. This is where a HELOC can offer a smart alternative.

Let's say you take out a $25,000 used car loan with an 11% APR and a payback period of five years. Your monthly payment would be $544, and you’d pay $7,614 in interest over the life of the loan.

Alternatively, let's say you borrowed $25,000 with a HELOC at 8% APR over five years. Your monthly payment would be roughly $507, and you’d pay about $5,415 in interest. That’s a savings of around $37 per month and roughly $2,200 in interest over the life of the loan.

Interest may be tax deductible if you use a HELOC for home improvements, provided you itemize deductions.

4. Tuition

Whether investing in your own education or your child’s, higher education often pays off over the long term. According to the U.S. Bureau of Labor Statistics, people with a bachelor’s degree earn roughly 68% more per week than those with only a high school diploma.9 Beyond the paycheck, a study by the Pew Research Center shows college graduates report higher job satisfaction.10

Before considering a HELOC to fund education costs, it’s worth filling out the Free Application for Federal Student Aid (FAFSA) to determine your eligibility for grants, scholarships, and federal student loans. Currently, federal student loan fixed interest rates range from 6.53% to 9.08%.11

They also offer flexible repayment options, including income-driven repayment plans, deferment or forbearance during financial hardship and loan forgiveness options.

If federal aid alone doesn’t cover the full cost of tuition, a HELOC may be an attractive alternative to private student loans. Private loans often come with higher interest rates12 and fewer borrower protections than federal student loans. You may qualify for a lower rate with a HELOC.


5. Buying an Investment Property

Buying an investment property can diversify your portfolio and help you build long-term wealth. Whether you're interested in a local rental property or a vacation home, real estate offers income potential and asset appreciation over time.

However, mortgages on investment properties have stricter requirements than those for a primary residence. Lenders typically require a down payment of 15% to 30% and interest rates tend to be higher as well.13

If you have a lot of equity in your current home, a HELOC can help cover that down payment, potentially allowing you to buy the property without depleting savings or liquidating other investments.

One downside to this strategy is that while mortgage interest on a rental property may be deductible, the IRS specifies that interest on a HELOC is only deductible if the loan is secured by the property itself.14 You can't deduct the HELOC interest if you use the equity from your primary residence to buy an investment property.


6. Starting a Business

Traditional small business loans often offer favorable terms and the ability to deduct loan interest as a business expense. However, qualifying for a business loan isn’t always easy for new entrepreneurs without collateral or a track record of profitability.

If you find yourself in this position, a HELOC can give you access to capital when other options are limited. Plus, the interest may be deductible as a business expense. But talk to your accountant to make sure your HELOC meets the requirements.

There’s a caveat to all these uses for a HELOC. Because your house acts as collateral, missing payments puts your home at risk. Before tapping your home equity, consult both your mortgage officer and a trusted financial advisor to carefully evaluate the risks — and to create a solid plan to repay the HELOC.

Important disclosure information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information. Diversification does not ensure against loss.

  1. Federal Reserve Board, “Consumer Credit – G19,” updated March 7, 2025. Accessed March 24, 2025. Back
  2. Miranda Marquit, “Current HELOC rates — And How to Get the Lowest Ones,” Buy Side from WSJ, updated March 5, 2025. Accessed March 24, 2025. Back
  3. The Journal of Light Construction, “2024 Cost vs. Value Report,” accessed March 24, 2025. Back
  4. IRS.gov, “Question: Is interest paid on a home equity loan or a home equity line of credit (HELOC) deductible?” updated October 8, 2024. Accessed March 24, 2025. Back
  5. IRS.gov, “Topic No. 703, Basis of Assets,” updated November 8, 2024. Accessed March 24, 2025. Back
  6. Ben Luthi, “Used Car Loan Rates for February 2025,” Experian, published February 27, 2025. Accessed March 24, 2025. Back
  7. Louis DeNicola, “Which Credit Score Is Used for Car Loans?” Experian, published May 15, 2019. Accessed March 24, 2025. Back
  8. CBT News, “Study found new car prices surged to record highs, leaving used cars as the affordable choice,” published November 5, 2024. Accessed March 24, 2025. Back
  9. U.S. Bureau of Labor Statistics, “Median weekly earnings of full-time workers with only a bachelor’s degree $1,541 in Q4 2024,” published July 25, 2024. Accessed March 18, 2025. Back
  10. Pew Research Center, “How Americans View Their Jobs,” published March 30, 2023. Accessed March 24, 2025. Back
  11. U.S. Department of Education, “Interest Rates and Fees for Federal Student Loans,” accessed March 18, 2025. Back
  12. Melanie Hanson, “Average Student Loan Interest Rate,” Education Data Initiative, updated March 14, 2025. Accessed March 24, 2025. Back
  13. Karen Axelton, “How Investment Property Mortgage Rates Differ from Conventional Mortgage Rates,” Experian, published March 12, 2025. Accessed March 24, 2025. Back
  14. IRS.gov, “Publication 530: Tax Information for Homeowners,” published February 5, 2025. Accessed March 24, 2025. Back