Benefits Of A HELOC: Don’t Ignore Your Equity
If you have equity in your home, you can apply for a home equity line of credit (HELOC). A HELOC can help you pay for a major financial expense, a vacation, college education, a home renovation, or anything you want. You may be wondering, “Is a HELOC a good option for me?” Well, you’re in the right place. This blog post will provide you with some general information, as well as benefits of a HELOC.
Two Types Of HELOCS: Fixed & Variable
There are both fixed rate HELOCs and adjustable rate HELOCs. The difference between the two has to do with the interest rate. With a fixed rate HELOC, your interest rate will not fluctuate throughout the term of the loan. However, with a variable rate HELOC, your interest rate may fluctuate over time.
There are many key benefits to getting a HELOC over another type of loan.
5 Key Benefits Of A HELOC
- Debt Consolidation.
Many times HELOCs have lower interest rates than other types of loans. With a HELOC you may be able to pay off higher-interest debt at a slower rate in order to makeyour monthly payments more affordable.
- You Pay Only On The Amount You Use.
One of the major benefits of a HELOC is you only pay interest on the amount you borrow, not the entire principle. For instance, if you get a HELOC for $60,000, but only utilize $45,000, you will only pay interest on the $45,000 that you have utilized, not the entire $60,000 loan.
- Tax Advantages.
It is possible that a HELOC could provide you with various tax advantages that you are not able to get with other types of loans. In order to determine if a HELOC could provide you with tax advantages, consult your tax adviser.
- Lower Interest Rates.
HELOCs typically have lower interest rates than other types of loans. This is what makes it great for large financial expenses. One thing to keep in mind is that your credit score will have an impact on the rate that you are able to obtain. The higher your credit score, the lower interest rate you may be able to obtain.
- You Can Improve Your Credit Score.
Making timely payments on your HELOC can improve your credit score, signaling to financial institutions that you are a responsible borrower.
The first step in determining if a HELOC is right for you is to speak with a Launch FCU Home Loan Specialist. If you only need a small amount of money, a different type of loan, such as a personal loan, may be a better option simply due to the origination fees and other closing costs associated with a HELOC. Bottom line, a HELOC is typically a better option for large financial expenses, due to their typically lower interest rates. If you are still unsure on if a HELOC is the right option for you, consult your local Home Loan Specialist.
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