Alternatives to Home Equity Loans and Home Equity Lines of Credit


Kimberly Goodwin, PhD
July 31, 2018

If you are a homeowner and need some cash to make a big purchase, a home equity loan or home equity line of credit (HELOC) can be a great borrowing option. Both of these home equity products let you borrow against the equity you have already built up in your home.

A home equity loan gives you a lump sum that you repay at a fixed interest rate over a period of around 10 to 15 years. A HELOC lets you access a credit line up to a maximum amount to use when you need the money, and usually has a variable interest rate. You can even pay off your balance and use the credit line over and over again.

Both forms of credit usually have some type of origination or closing fees that vary with the particular lender. They are both secured forms of debt, which means your home serves as collateral for the loan. The benefit to this is that your interest rate is low. Interest rates on home equity loans and HELOCs are only slightly higher than mortgage interest rates.

The drawback to this is that you risk losing your home if you can’t make the payments on your home equity loan or line of credit. So let’s take a look at alternative financing options that might be better for your specific borrowing situation.

Read the entire article »