Get your finance in order, with wealth management's must-read stories everyday!

As HELOCs Return, Here’s How and Why to Use One

Susan Kelly

Oct 02, 2023

If you're in the market for a loan or line of credit, you may have recently encountered a HELOC. Home Equity Lines of Credit (HELOCs) are home equity loans that allow homeowners to borrow money against their home's value and enjoy much lower interest rates than other types of financing.

If you're looking for ways to finance large expenses like renovations or debt consolidation, it can be not easy to know where to start – luckily, with more lenders embracing HELOCs, they could be the answer you need. In this post, we'll take an in-depth look at what HELOCs are all about and how they may be able to help your financial goals.

What is a HELOC, and How It Work

A Home Equity Line of Credit (HELOC) is a loan that lets homeowners use the equity in their home as collateral. HELOCs allow people to borrow money at lower interest rates than other types of financing and can be used for larger purchases such as renovations or debt consolidation.

HELOCs are structured much like a credit card: borrowers can draw from their credit line up to a specific limit, pay interest on the amount borrowed, and make payments over an agreed-upon period. Homeowners must have sufficient equity in their homes to qualify for a HELOC. The lender may also require an appraisal of the home's value during the application.

As HELOCs return as an option for financing large projects, it's important to know what they are and how they work. With their low rates and flexible terms, HELOCs may provide the perfect solution if you're looking for ways to finance renovations or debt consolidation. Be sure to weigh your options carefully before taking on this type of loan.

What HELOCs Are Good For

A Home Equity Line of Credit (HELOC) is a popular loan option for homeowners looking to finance large expenses. Since HELOCs offer much lower interest rates compared to other types, they can be an ideal way to pay off debt and consolidate finances.

Also, HELOCs allow homeowners access to funds without taking out multiple loans or dipping into their savings. As the market has shifted towards HELOCs in recent years, lenders have been quicker than ever to approve applications for these specialized lines of credit.

HELOCs also provide flexibility by allowing you to borrow as needed instead of in one lump sum. This flexibility allows borrowers to keep some cash while still obtaining the funds necessary for their projects.

A Home Equity Line of Credit can offer much lower interest rates for homeowners looking to finance large projects and expenses than other financing options. With the return of HELOCs in the market, now is a great time to learn more and explore how they might benefit you.

How To Qualify For a HELOC Loan

Qualifying for a HELOC loan requires having sufficient home equity and meeting income requirements. Home equity is the difference between what your home is worth minus the amount you owe.

To qualify, many lenders require you to have at least 20% of the value of your home as equity. Additionally, you must prove that you can make payments on time for the loan period. Lenders may also consider your credit score, debt-to-income ratio (DTI), and financial history to determine whether you are eligible for a HELOC loan.

An established credit record will give lenders more confidence in lending to you and could result in better terms on any loan offers they provide. Ultimately, meeting these qualifications can help you get the funds you need for whatever expenses you have in mind.

The Terms and Interest Rates Associated With HELOC Loans

HELOCs are an attractive option for homeowners because they come with much lower interest rates than other types of financing. The terms associated with a HELOC loan vary from lender to lender but typically feature flexible repayment plans that allow you to repay the loan over 25 years.

Interest rates on HELOCs also tend to be much lower than those on credit cards or personal loans. You can expect an interest rate between 4% and 8%, depending on your situation, credit score, and other factors.

With some lenders, the interest rate is even adjustable – meaning it may increase or decrease depending on market conditions. The low-interest rates and flexible repayment terms make HELOCs attractive for many homeowners looking to finance large expenses.

Ways To Save Money on a HELOC Loan

A Home Equity Line of Credit (HELOC) is a great way to save money on large renovations or debt consolidation expenses. As lenders become more and more comfortable with offering HELOCs, there are several ways you can take advantage of these loans to maximize your savings.

For starters, the interest rate associated with HELOCs is significantly lower than other types of financing. Many lenders offer adjustable-rate HELOCs, starting at lower rates for the first five years before adjusting depending on market conditions. This lower makes it easier to budget for future payments because you know exactly how much you'll pay each month.

Additionally, some lenders offer introductory offers and promotional deals that can help you save money on your HELOC. Look for deals like cash-back offers, waived fees, or discounts that can reduce the overall cost of borrowing.

Finally, most lenders will allow you to make additional payments on your HELOC without penalty. This strategy can help you quickly pay off the loan and save money in interest costs over the life of the loan.

Alternative Uses For Borrowing Against Your Home's Equity


A HELOC gives you access to funds that may be used for investment opportunities like stocks and mutual funds. However, it's important to remember that any money borrowed should only be used if you're confident in the investment and can afford the repayments.


If you have a family member planning on attending college, they may benefit from tapping into your home's equity. The funds can be used to pay tuition fees, books, and living expenses.

Home Improvements

A HELOC loan could help fund renovation projects around your home, like building an extension or installing solar panels. This use could increase the value of your property over time, making it a sound investment choice.


Taking a vacation can get expensive quickly, but with a HELOC, you can access funds that can cover the cost of flights, accommodation, and activities.


Why should I use a HELOC?

A HELOC is a great option for homeowners needing refinancing or accessing funds for large expenses. It can provide you with both affordability and flexibility due to its lower interest rates than other types of financing.

How do you use a HELOC effectively?

Before taking out a HELOC, understand the terms of your loan and work within your budget. It's important to make regular payments to stay on track with repaying the loan. Additionally, it would be wise to monitor interest rates as they may change based on market conditions.

What are the risks associated with a HELOC?

As with any loan, there is always a risk of falling behind on payments or being unable to repay the loan. It's important to carefully consider your financial situation before taking out a HELOC and ensure that you have a plan to ensure timely payments.


A home equity line of credit (HELOC) can be a great tool for savvy homeowners. With the right terms and conditions, HELOCs offer flexible payment options and reasonable interest rates – much lower than conventional loan options. Once you understand how they work, have been approved, and think through your primary objectives, you can use the new influx of HELOCs to help fund a major renovation project or to consolidate debt at a lower interest rate. It's important to remember that while it is possible to save money this way, not all situations are equally beneficial or financially healthy.

Related Stories

Privacy Policy | Terms of Use

© 2023

Contact us at: [email protected]