Understanding A HELOC Loan
If you’re facing a major expense it may be tempting to pull out all the credit cards in your wallet to help cover the expenses. Doing this could require you to max out your credit cards, which could result in an unmanageable amount of debt, as well as a decreased credit score. We have good news! If you own a home, and have equity built up in your home, you may have another option. A HELOC loan could be the key to helping you pay for a major expense, without having to jeopardize your credit, or rack up debt on high-rate credit cards. This blog post will help you understand the basics of HELOCs, and provide you with four instances where applying for a HELOC loan could benefit you.
What Is A HELOC Loan?
A home equity line of credit, often referred to as a HELOC, is a line of credit that is secured by your home. A HELOC loan provides you with a revolving line of credit that you can use for major expenses, and a HELOC loan typically has lower interest rates than other types of loans. A HELOC loan will provide you with added convenience, by allowing you to use the line of credit when and how you want.
How Does A HELOC Loan Work?
A major reason many Floridians apply for a HELOC loan is for the convenience factor. A home equity line of credit allows you to borrow against the equity you have available in your home, using your house as collateral for the line of credit. With a HELOC loan you can draw from your line of credit as you need. As you pay your balance down, your amount of available credit is replenished. With a HELOC loan, you can borrow as much or as little as you need throughout your draw period, up to your credit limit that was established during your closing period. At Launch CU, you can borrow up to 80% of your property’s value.
How To Qualify For A HELOC Loan
In order to qualify for a HELOC loan you must first have available equity in your home. This means that you must owe less on your home than the value of your home. Thus, if you are a renter, you do not qualify for a HELOC loan. When you apply for a HELOC, a lender will also take a look at your credit score, credit history, monthly income, debt-to-income ratio, etc. If you have a lower than desirable credit score, consider improving your credit score before you apply for a HELOC loan.
Risks of A HELOC
HELOCs do require that you use your home as collateral for the loan, which could put your home at risk if your payment is late, or if you cannot make your payment at all.
Who Should Consider Getting A HELOC?
You can use a home equity line of credit for many purposes. A HELOC could be a great option for you If you know that you will be experiencing a big one-time expense such as college education, medical bills, or a home improvement project because HELOC rates are lower than other loans due to the fact that they are backed by collateral. If you need additional funds for everyday purchases, or you want to consolidate your debt, you may want to consider a Launch CU signature loan (personal loan).
4 Great Ways To Use A HELOC
- Debt Consolidation
If you have a lot of credit card debt, applying for a HELOC could be a great way to help you pay off your balances faster since HELOCs typically have lower interest rates than credit cards. For example, many credit cards have an interest rate of 26% or higher. If you could be approved for a HELOC with an interest rate as low as 6%, it is easy to see how much money you could save in interest every month. Not to mention how much quicker you could pay off your debt.
- Home Renovation Or Home Improvement
Another reason many Floridians apply for a HELOC loan is to help complete a home renovation or home improvement project. It’s no secret that home remodeling and repairs can be pricy. Borrowing against your home’s equity could be a way to make these types of projects more affordable. A home equity line of credit loan can also provide you with added convenience during a home remodel project, by allowing you to take money out as you need it to pay for supplies or to pay contractors.
Though many people have a separate emergency fund, there is always the chance of experiencing an emergency that is larger than the amount you have saved up. Instead of putting the excess on a high-rate credit card, consider applying for a HELOC to help you cover the additional costs. In most instances, a HELOC loan is more affordable than a credit card given the typically lower HELOC interest rates today. A HELOC could be the perfect solution to help give you the cash you need to pay for an expensive hospital visit while helping you to spread out the payments without racking up a ton of interest.
- College Education
We all know college is a huge expense, that’s why many people use a HELOC loan to help cover the costs associated with a college education. Often times HELOC interest rates are typically lower than student loan interest rates, helping to make an expensive education a bit more affordable.
What If I Don’t Have Equity?
If you don’t have equity in your home, there are other options besides a credit card to help you fund a major expense. If you are a renter or a new homeowner, consider applying for a personal loan to fund a major expense before charging it all on a high-rate credit card. Personal loan rates are also typically lower than credit card interest rates, which can make paying off a major expense much easier and affordable.
For More Information On A Launch CU Home Equity Line Of Credit & How To Apply
To apply for a HELOC, simply fill out our easy-to-use online loan application. We understand that home equity products line of credit can be a confusing topic, but we are here to help. Give us a call at 321-455-9400 (Inside Brevard), or 800-662-5257 (outside Brevard), or come visit us at any of our branch offices to talk about which product is right for you.