HomeTop Stories3 advantages HELOCs currently have over other credit options

3 advantages HELOCs currently have over other credit options

Thanks to low interest rates and a large amount of equity to use, a HELOC may now be worth pursuing.

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While many Americans hoped that the worst of this inflation cycle was over, recent reports have dampened that optimism. Inflation rose in February And MarchThis is all but a guarantee that today’s high interest rates, which are intended to tame it, will remain high – and possibly rise again. One Fed official has already talked about it filing rate cuts for the remainder of 2024 – and that was before the most recent disappointing inflation report.

That’s bad news for borrowers, many of whom have already faced higher interest rates credit cards, personal loans and other popular credit options. So, with the current inflationary environment, it is up to borrowers to explore their alternatives. Especially for homeowners, this can take the form of a home equity loan equity loans or home equity lines of credit (HELOCs).

The latter form in particular has unique benefits that borrowers may want to explore now. Below we highlight three of them.

See how much you can borrow with a HELOC here.

3 advantages HELOCs currently have over other credit options

Here are three key benefits of using a HELOC right now.

Lower interest rates

While the current mortgage loan and HELOC interest rates While you haven’t been immune to an environment of rising interest rates, they are still significantly lower than what you can secure with the alternatives. Credit card interest rates are currently around 20%, while personal loan interest rates approach 13% on average.

However, HELOC rates are currently around 9%. That makes a big difference for borrowers and can mean significant savings. Granted, part of that difference comes from your home being used as collateral. But if you know you can pay back the money you borrow on time, these lower rates are worth pursuing.

Explore multiple HELOC options online today.

The potential for even lower rates ahead

Certainly, an interest rate cut seems further away than many had hoped at the moment. But if inflation comes back under control and the Federal Reserve is confident in the downward trend, it is certainly possible (if not likely) that interest rate cuts will occur. That could be a big boost for HELOC borrowers, because The interest rates on this form of credit are variable, meaning they will adjust as the interest rate environment evolves. So if the overall rate environment drops, the rate you pay for your HELOC will drop as well, putting money back in your pocket without any additional work being done on your behalf.

There is a lot to use

Forget asking to increase your credit card borrowing limit. While that may be a small help, the average homeowner currently has about $300,000 in home equity, of which about $190,000 is accessible, according to a recent report. So you may have a lot to use right now.

And if you’ve paid off a significant amount of your home loan, or if you live in one of the many regions of the country where home values ​​have increased, you may have even more to borrow at this point. But because The equity of the house is calculated by subtracting your mortgage amount from the appraised value of your home, it may make sense to pursue a HELOC now while the numbers are still favorable.

it comes down to

With interest rates currently high for borrowers, it is important to explore all options. A HELOC could be a better option for many borrowers. Due to its lower interest rates (compared to popular alternatives), the potential for lower interest rates in the future, and a significant average number of equity owners to tap into now, this could be the best credit type to pursue right now as inflation and Interest rates are still higher than many would like. As noted, be sure to weigh the products carefully pros and cons of HELOCsbecause you may lose your home if you do not pay back the borrowed money on time.

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