Consolidating debt with a home equity loan
HELOCs often allow you to pay back on the amount borrowed while still having available credit to tap, so it suggests strategic purchases that follow suit.
Check with different lenders for the specific terms they will extend to you – it may vary by lender.
It is common for consumers to have some amount of credit card debt spread out over different providers.
They may also hold small loans, car payments, medical bills and other monthly obligations that spread-out their payments to multiple lenders.
A HELOC has draw period where the borrower can spend up to their credit limit, followed by a repayment period.
Trans Union recently reported that HELOCs are on the rise as a popular home equity tool, with over 2/3 of current homeowners able to secure one.
The same study pointed to debt consolidation as one of the main uses for a HELOC, a fact supported by other consumer reports.
However, a HELOC presents some degree of risk for the borrower, beyond the fact of using the home as securing collateral.
It may be wiser – and cheaper – to lock in a lower fixed rate, sooner, using a different form of equity borrowing.
HELOCs are strategic for tapping smaller amounts as needed, like for financing renovation projects, or making college tuition payments every semester.