I have lots of customers who come in and have no idea what different products are so I want to help everyone out as much as I can to understand!
We will start with the simple stuff… What is a HELOC?
A HELOC is an acronym for Home Equity Line of Credit. This is a line of credit using the equity you’ve built up in your home. For example, say you bought your home for $100,000 and you’ve been paying on it for 3 years now so you owe $90,000. Your home may be worth $120,000 and you owe $90,000, so you have $30,000 in equity. If you are using your equity to borrow money versus using other collateral, you sometimes are getting a better deal especially if you are wanting to pay off credit cards that are at 25% interest.
A lot of people also use HELOCs to improve their home or pay off debt. Working at a bank, those are most of the instances that I have experienced. They are wanting to update their kitchen or payoff their credit cards. Using the equity in your home is great for things like this because it is not an unsecured loan or a car loan.
So why should you get a HELOC?
In America, it is the norm to have debt. Whether that be car loans, credit cards, personal loans, etc. We all have debt in some way. HELOCs make it to where that debt is all under one roof and paid under one interest rate rather than having one car loan for 5%, 3 credit cards for 25% each, and whatever other loans you may have with interest attached to them. You can save lots of money just by consolidating your debt and having it all in one place. It is also you borrowing from your house versus borrowing essentially from yourself with a high interest rate.
I would be happy to give you all the details but every bank's stipulations are a little different. Feel free to message me about my banks rules!
If you own your home or if you are buying your home, go into your local bank today and talk to a banker about a HELOC! It may save some of your lives and open up a lot of other opportunities with money that you never knew you had!