Improving Your Home One of the most common ways to use a home equity loan is for home improvements, says Dave Krichmar, a Houston mortgage banker

Consolidating Debt Home equity could help you pay off high-interest debts such as credit cards and loans at a lower rate over a longer term, reducing your monthly bills and total interest costs

Starting a Business If you're sitting on a lot of home equity, you could turn it into a source of funding for a new business

Paying for College Higher education, whether for yourself or your children, can be a good investment in the future.

Funding an Emergency If you don't have an emergency fund to cover three to six months of living expenses, a HELOC could be your safety net while you save up.

The benefit should outweigh the cost, Krichmar says. If you're taking out a small home equity loan, look closely at the fees. If they are too high, they could make the cost outweigh the value of taking cash out of your home.

Home equity loans typically have low rates because they are secured by your property, and they allow you to borrow large amounts of money against your home.

A home equity loan allows you to borrow a lump sum against the equity you've built in your home. Home equity is the difference between how much you owe on your mortgage and how much your home is worth