Voltage instability is a major problem in power system it seldom results in voltage collapse and blackout. FACTS devices can be used to maintain voltage stability by controlling active and reactive power and increase voltage stability margin. Optimal location of these devices is also an important issue. In this paper static var compensator (SVC) is used to improve voltage stability. Optimal location of SVC is found by continuation power flow and by finding fast voltage stability index. SVC is placed at optimal location and its effect on improving voltage stability, loadability limit and reducing power losses have been studied under normal as well as contingency conditions. Two types of contingencies are considered, transmission line (N − 1) contingency and generator outage contingency. The proposed work is tested in IEEE 14 bus test system.