Is a Home Equity Line of Credit a Good Idea
Life has a wonderful way of throwing surprises our way: once you tackle one obstacle it seems like you’ve barely had a chance to breathe before the next one is demanding your time and money. Sometimes your financial obligations just seem overwhelming, and you aren’t alone on that. You can take your biggest asset – your home – and use it to your advantage to get on top of all of your obligations and make sure your debt isn’t growing uncontrollably.
What is a Home Equity Line of Credit?
Well, it’s very similar to a personal line of credit where you have a specific revolving amount of money you have access to and you need to make regular payments on the portion you use. Unlike a personal LOC, though, this kind is secured using your home as collateral.
Lock in a Lower Interest Rate
Due to the fact that a HELOC is secured against your home, lenders can often offer lower interest rates than they would on a conventional, personal line of credit. You can use this to your advantage and transfer over debts sitting on a credit card and pay them off sooner with less money going towards interest.
Unlike your mortgage, a HELOC offers you revolving credit and the limit is usually based on the value of your home and how much equity you have in your home. As long as you’re paying back the portion you use of the line of credit you can continue to use the money how you need it. If you need it for some renovations, then pay it back you can use it for the next project in a few months or years time. How you use the money is up to you, as long as you pay it back.
A home equity line of credit (HELOC) is like any other credit obligation, it can help provide needed cash flow in an emergency but it will always need to be paid back. As long as you’re using it responsibly then having a HELOC won’t hurt your credit.