Home Equity Line of Credit, HELOC, Home Equity Loans

Another popular way to use the equity in your property to get money is a home equity line of credit, commonly referred to as a HELOC. Unlike a home equity loan, where you borrow a lump sum, a home equity line of credit acts like a credit card, allowing you to pull from it as often as needed up to a certain amount. The money in a home equity line of credit can be retrieved by using a credit card or check.

Two advantages to a home equity line of credit, like a home equity loan, are the low interest rates and tax deduction implications. These qualities make HELOCs very attractive for people looking to borrow money. The downfall to a home equity line of credit is that the interest rate is variable, meaning that the rate is adjusted by the government. When a borrower is looking to get a HELOC from a financial institution, he or she needs to consider what the index is and the margin that the lender uses to figure out its variable rate. As this rate may change from lender to lender, it is wise to shop around.

A home equity line of credit is a nice idea for people looking for extra money, but need to pull it out sporadically. As the money can be used and repaid over and over again, many people use a HELOC for such expenses as college tuition or for living expenses during times of unemployment.

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