heloc line of credit

5 Reasons to Consider a HELOC Instead of a Traditional Line of Credit

If you need access to a line of credit that is always available to you for virtually any reason, there are several options that are available to you. However, if you are a homeowner, you might already have everything you need to gain access to one of the most valuable lines of credit of them all in the form of home equity. Below are five reasons to consider a HELOC (Home Equity Line of Credit) instead of a more traditional option like a credit card. 

#1 – HELOC Funds are Easy to Access

When you need access to cash, a HELOC makes it easy to access exactly what you need when you need it. Though it is possible to get a cash advance on a credit card, the interest rates associated with doing so are often very high. A HELOC works much like a checking account, in fact; you can simply draw money from your line of credit instantly and pay it back as you can. 

#2 – Emergency Funds are Readily Available 

When your HELOC is approved, your lender will likely provide you with checks or a credit card that will allow you to access your line of credit as needed. This means that when an emergency occurs, you can simply use the check or credit card just as you would with your checking account to pay a service provider. We never know when an emergency will occur, and having access to the funds we need for emergency services can provide unparalleled peace of mind. 

#3 – You Don’t Have to Sell Your Home to Utilize its Value 

Many lenders offer options with HELOCs to help manage them both now and in the future. For example, you may qualify for something known as an early HELOC, which allows you to essentially lock in your equity amount based on the present value of your home. Even if your equity value declines in the future, and even if the sale price falls for any reason, you can still have access to that locked-in equity.

#4 – You Don’t Have to Put Off Home Improvements

If your home needs some improvements, or even if you want to remodel your entire home from front to back, a HELOC is a fantastic way to access the funds. While you could certainly use a high-limit credit card to pay for the materials and labor, credit card interest rates simply cannot match the rates associated with a HELOC. In other words, it costs far less to pull from the equity in your home than it costs to charge home improvement to a credit card. In fact, your home improvement projects may even increase your equity by adding more value to your home. 

#5 – Most Lenders Don’t Charge High Fees

The final reason to consider a HELOC over a traditional line of credit or credit card has to do with fees – or, in  the case of a HELOC, the lack of fees. With most lenders, there are very low costs associated with setting up your HELOC for the first time, and some lenders won’t charge any fees at all. Make sure that you talk to your lender about the fees associated with a HELOC, and be sure to ask about annual fees, too. While some HELOCs do come with an annual fee, they are much lower than credit cards’ annual fees. 

The equity in your home serves as outstanding collateral for a revolving line of credit. When you need access to funds, choosing a HELOC instead of  a credit card or other traditional credit line – and even instead of refinancing your home –  can save you time, money, and frustration. Talk to your lender today to see if you qualify for a HELOC and learn more about it today.