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The Top Benefits of a Home Equity Line of Credit (HELOC)

If you want access to a large sum of money — without taking out a traditional bank loan — a home equity line of credit (HELOC) may be just what you’re looking for. Depending on how much equity you have in your home, it may be the perfect way to get the cash you need in a relatively short period of time. 

It’s common to wonder if a HELOC is the right choice. If you’re on the fence, here is a list of benefits that may guide you down this path. 

Low Closing Costs

When compared to other products, such as a home equity loan, the closing costs are much lower. In fact, depending on the bank, there may not be any closing costs associated with the line of credit. 

Low Interest Rate

Since you’re putting your home up as collateral, the interest rate of a HELOC is lower than other products, such as a personal loan. Yes, you risk losing your home if you default, but as long as you stay current you’ll benefit from the lower rate. 

No Requirement to Use the Funds

A home equity loan is used in the same manner as a credit card. You borrow money when you need it and repay it according to the terms and conditions of your agreement. You can then borrow the funds again in the future.

However, there’s no requirement to use the funds. If you have no need for the money, you can simply leave the line of credit open for future use (should it be necessary).

Interest Only Payments

It may not be the smartest financial decision, but the ability to opt for interest only payments allows you to access funds with a smaller monthly obligation. Just make sure you know how long you can do this. For example, if you don’t repay your line of credit within x number of years, it’ll convert to a traditional loan. 

Tax Advantages

There are many variables that come into play, but you may be able to deduct the interest paid on your home equity line of credit. This isn’t the only reason to opt for a HELOC, but it’s another benefit to keep in mind. 

Before signing on the dotted line, contact your tax professional to discuss the tax advantages of a home equity line of credit. 

Use the Funds However You Please

There are no restrictions as to how you can use the funds from a HELOC. Maybe you need the money to complete a home renovation project. Or perhaps you’re tackling education expenses with it. The choice is yours. 

Final Thoughts

A home equity line of credit isn’t the right choice for everyone, but the benefits above show why so many people consider it a top option when in need of money. If nothing else, contact your bank, ask for more information on its HELOC products, and compare the pros and cons. You may find that it’s the perfect option for someone in your shoes. 


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