Whether it’s for home improvements, debt consolidation or financing your education, a home equity line of credit1 (HELOC) can add real value to your life. By better understanding how home equity works and ways to use it wisely, you can work toward making sure these extra funds benefit you.
Home Equity Lines of Credit, Explained
When you look at the amount of equity you have in your home – the current value minus the amount owed on a mortgage – it may present some helpful borrowing opportunities. You may want to consider a home equity line of credit.
A home equity line of credit is a variable-rate loan which acts similarly to a credit card. With a HELOC at Truliant, you can borrow up to 85% of your home’s equity value. Let’s say your home is worth $300,000, and you owe $100,000 on your mortgage. You would multiply the value of your home by 85%, and subtract the amount remaining on your mortgage to determine the amount of equity you could apply for. In this example, you would be able to apply for a HELOC in the amount of $155,000.
And with a HELOC, as you borrow money and repay it, you can reuse the credit amount again, hence the credit card similarity.
Home equity lines of credit are great to consolidate debt if used responsibly. It’s important to remember that home equity lines of credit are secured loans – and your house is the collateral. But, if you manage the payments and borrow prudently, HELOC’s offer valuable benefits, including the ability to consolidate debt at a lower interest rate.
Using a HELOC
One of the best uses for a HELOC is to finance home improvements. You are tapping into the value of your house to increase its value, while aiming to build long-term wealth. A HELOC is also a reasonable option to cover a financial emergency. It’s a reliable, relatively cheap source of money if your financial options are suddenly limited through a job loss or other unfortunate event.
A HELOC can also be a useful tool for consolidating debt. Let’s say that a person has five credit cards, each with a balance of $5,000, at an interest rate of 18%. By consolidating the $25,000 in total balances in a HELOC with an APR2 of 4.25%, a person could potentially save hundreds of dollars in interest. Additionally, their credit score may improve as the outstanding balances are moved into that person’s account.
It’s a good idea to apply for and secure a HELOC before you need the money. You’ll get much better terms and a higher line of credit if you are in a healthy financial position, have secure employment, and the equity value of your home is high. Even if you don’t need the funds right now, a HELOC can contribute an added level of financial security to your life.
Other HELOC Advantages
Another HELOC advantage is that you can pay it down over a longer period of time, if needed. With Truliant, your monthly payments are 1% of the outstanding balance. So, if you’re in a financial bind and need to use your HELOC, you can give your finances time to recover.
Additionally, unlike some financial institutions, Truliant does not require you to make a minimum withdrawal on a HELOC. And, with Truliant, if you have to make a late payment, it will be 5% of the outstanding payment past due after 15 days.
If you think a HELOC is right for you, visit Truliant at one of it’s 33 convenient branches. You can also apply anytime, 24/7, by calling 855-293-2957, or online at Truliant.org/HomeEquity.
Federally Insured by NCUA. Equal Housing Lender. (1) Home Equity Line of Credit is a variable rate loan with a maximum of APR of 18%. Available in FL, GA, NC, OH, SC, TN and VA only. (2) APR = Annual Percentage Rate. Loans subject to credit approval. Rates/terms subject to change.