What Is a Home Equity Line of Credit (HELOC)?
A HELOC is a revolving line of credit that lets you borrow against the equity in your home, similar to a credit card but backed by your equity in your house. You can draw money as needed during the “draw period” and repay it over time, with interest rates that typically vary. Payments can change as rates move, making HELOCs flexible but less predictable than fixed loans.
Who Is It Best For?
HELOCs are best for homeowners who already have some equity and want flexible access to cash for things like renovations, education costs, or consolidating debt. They’re a good fit if you’re disciplined with credit and comfortable with payments that can change over time.
Who Should Think About It Twice?
If you’re not great with managing debt or your income is unpredictable, a HELOC could become a problem. Because the interest rate can rise and you’re borrowing against your home, missing payments could put your house at risk.
Pros and Cons
| Pros | Cons |
|---|---|
| Flexible borrowing—you take only what you need | Interest rates are usually variable and can rise |
| Good for large expenses like renovations or tuition | Your home is collateral—missed payments risk foreclosure |
| Often lower interest than credit cards or personal loans | Budgeting can be harder with changing payments |
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