Home Equity Lines of Credit allow you to borrow against your home’s equity to get cash for other needs. Establishing a Line of Credit today can prepare you for unexpected expenses in the future or help you achieve your goals like:
- Home Improvements
- Debt Consolidation
- College Expenses
- Car Purchases
- Second Homes
- Medical Bills
But before jumping into a Home Equity Line of Credit (HELOC), you need to understand what they are, and if they’re right for you and your family.
What is a Home Equity Line of Credit?
What is a Home Equity Line of Credit? Here’s the simplest definition: your home has value and a HELOC lets you borrow on that value.
Like a Home Equity Loan (yes, they’re different), a HELOC allows you to borrow money using the equity in your home as security on a loan. A HELOC, though, is similar to a credit card; you’re able to borrow money on an as-needed basis… it’s not a lump sum.
If you’re approved for a HELOC, you’ll be able to withdraw money during a fixed amount of time (draw period). During this period, you’re borrowing against the equity of your home for things that you need to pay for (usually over a period of time).
Once your draw period ends, you’ll no longer have access to funds. At this time, you’ll prepare for the repayment period (when you pay back the principal and interest balance of your HELOC).
Is a HELOC Right For Me?
Before making a decision on whether or not a HELOC is right for you, it’s important to look at your financial responsibilities now. What are your monthly total expenses? What will they be after you receive the HELOC loan? Will you have enough cash flow to cover those expenses (or any goals you’re trying to meet)? That’s step one.
Step two is understanding why a HELOC may be the best option. Want to borrow money but not exactly sure how much you’ll need? Are you going to be paying for something over time? Medical bills? College tuition? Major renovations to your home? A HELOC may be exactly what you’re looking for.
A Home Equity Line of Credit can really be a fantastic, low-interest way to borrow money when you need it the most.
The Republic Bank of Chicago team is happy to help you understand if a Home Equity Line of Credit is the right loan for you and your family. Please reach out to us at 800.526.9127 so that we can help you make the right borrowing decision.
For more information on Home Equity Lines of Credit, click here.