When you think loans, what comes to mind? If you’re like most people, borrowing money means receiving a single sum of money that you pay off with interest over time. And, while a traditional loan may be a perfectly fine option, there may be a better way to borrow. A home equity line of credit (HELOC) differs from a traditional loan in several major ways, but many people are unaware of its advantages. Here are 4 things you need to know about HELOCs.
Unlike a traditional lump sum loan, a HELOC gives you access to a line of credit up to a certain limit with your home acting as collateral. Think of it kind of like a credit card. Whereas traditional loans give you a lump sum payment that has to be paid off with interest over time, a HELOC lets you choose when and how much to borrow. This means that you can borrow as much or as little money as you want with all the convenience of a credit card, depending on circumstance and need.
Because a HELOC lets you borrow money at a moment’s notice, it’s much more flexible than a traditional lump sum loan. Let’s say you have an upcoming home repair or even an event such as a wedding that’s going to cost money. Your HELOC is ready and waiting for you to withdraw money and spend it on needed purchases. This means that you have the option to borrow only as much as you need whenever you need it, making it an extremely flexible loan option. A HELOC gives you all the advantages and convenience of a credit card, but usually with a much more manageable interest rate.
Besides being flexible in terms of timing and the amount of the loan, a HELOC is a great way to borrow money for just about any purchase. Because your home is used as collateral for a HELOC, it’s usually a good idea to use the money for things that will build wealth, such as home repairs or upgrades. But, that’s not to say you can’t use it for other things, as well. A HELOC can also be an affordable way to plan a big event, take care of emergency expenses, or go on a much needed vacation.
Unlike many traditional loans, including credit cards, a HELOC can be an affordable way to borrow money. And, because your home is used as collateral for the loan, your lender takes on a much lower risk and passes on the savings to you through your interest rate and closing costs. Some lenders even offer introductory rates, which can be great especially if you’re planning to borrow the money in the short term. At Utah First, we are offering HELOCs with no annual fee or origination costs. And if money is tight, we have interest-only payment options available to alleviate some of your financial stress.
Plus, because it’s often an affordable way to borrow, a HELOC can be used to consolidate other high interest loans And as an extra perk, loan interest may be eligible as a tax deduction.
If you’re ready to take advantage of all the benefits, convenience and of a HELOC, check out the current interest rates, as well as our hassle-free HELOC application process.
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