The average homeowner will want to take a close look at what a HELOC can do for them. There are significant advantages to getting a home equity line of credit, as opposed to a traditional home equity loan, and the choice needs to be made carefully and thoroughly. You may find that a HELOC is exactly what you need.
HELOCs offer several advantages over traditional home equity loans. First, HELOCs come with variable interest rates, which are based on such indices as the prime rate. This means that if economic conditions change, and the prime rate changes, then you could be looking at a much lower interest rate on your loan. That’s something that could really save you money.
Another advantage to a HELOC is that in most circumstances the interest that you pay on your HELOC is tax-deductible. This makes it a far more advantageous borrowing instrument than a credit card.
People are also attracted to HELOCs for their flexibility. If you take out a HELOC, your monthly payment on the principal can be whatever you want it to be. (You will have to pay the monthly interest, of course.) Once you do pay off a chunk of the initial loan, you then have the option of borrowing the difference again. This flexibility gives homeowners more options when it comes to financing both big-ticket items and just day-to-day cash flow.
If you’re thinking about getting a HELOC, be sure to sit down with a financial advisor or bank representative and go over your options in as much detail as you can. With the economy in a major rough patch, everyone – especially homeowners who are grappling with a troubled real estate market – needs to be on their toes and on the lookout for the best deals possible.