Home equity line of credit

HELOC(Home Equity line of credit) is the loan you borrow from the financial establishment, lender, or bank with your home as collateral. It is the line of credit borrowed against a 20-25% down payment on your house.

You must pay this amount with interest in the agreed period with the lender. After that time limit, the lender can take the borrowed amount with the equity.

Who can qualify for a HELOC?

HELOC depends on your credit score and house downpayment. If you saved up 20-25% of your house’s downpayment and your credit score is 670 or above, you can qualify for a home equity line of credit. HELOC is convenient for people trying to borrow a second mortgage at lower interest rates.

Reasons to get a HELOC

Following are some of the reasons to get a Home Equity line of credit:

Pay off debt

Getting a HELOC is a good option if you want to pay off debt but already have a mortgage on your house. Getting a second loan from the bank might cost you higher interest rates. But getting HELOC from another financial firm will get you lower interest rates with your home as equity. This home equity line of credit will help you pay off your debt on easy terms.

Loan for a new business

HELOC is a great way to get a second loan with lesser interest rates to start a new business. With the business slowly progressing, you will be able to pay off your HELOC in the required time.


There may come some times when you find yourself in a financial emergency. HELOC might save you in these conditions. It provides you with a quick loan with more accessible terms of interest. The repayment method for HELOC is more accessible than getting a credit card loan from a bank. This line of credit is helpful for rainy days.

Reasons to not get a HELOC

A home equity line of credit might prove helpful in a lot of ways. But HELOC also has downsides. Here are some of the reasons why you should not consider getting a HELOC

Debt on Debt

HELOC is not just credit. It is another debt on debt. When you have to pay it back, it will require a double amount of money. It would help if you had a secure credit score to keep this line of credit getting paid.

Unreliable source of credit

Suppose you have applied for a HELOC. When you plan to spend the Home Equity line of credit for emergencies, then think twice. Banks sometimes block HELOCs in times of recession. They also block HELOCs in terms of low credit scores. So it would be best if you did not rely on this money.

Consequences of missed payments

As you place your home as equity for the HELOC, it can have consequences. A series of missed payments might result in the lenders or the government sealing off your home. Getting a home equity line of credit should be your last resort to getting a HELOC, which might have serious consequences.


HELOC(Home equity line of credit) is a convenient way to get money quickly. It has its upsides and downsides. Getting a HELOC can be helpful in emergency conditions, paying off debts, and investing in a business plan.

When you cannot pay off a HELOC in the required time, your home will be the price. This can be due to a low credit score or a significant drop in the job scope. Be careful before you get a HELOC because If not paid, there can be regretful results. Make sure to make a wise decision in this matter.