Your HELOC credit line is an important tool in helping to take care of your financial health. A Home Equity Line of Credit (HELOC) is designed to allow you to use just the amount of money you need for things such as college tuition and paying off large credit card balances. Over the long run, using a HELOC credit source is convenient and will save you money.
HELOC credit terms
HELOC credit terms vary depending on the lender and your specific credit situation. Repayment begins after a draw period and may consist of a single balloon payment or the repayment may continue over a period of time using a variable interest rate that is tied to the Prime Rate. A HELOC is typically structured with a draw period of usually eight to ten years. During this period funds may be withdrawn up to the maximum of the HELOC credit amount and interest only payments must be made.
HELOC credit line refinancing
Once the repayment period begins, the large single payment is due if the HELOC credit line is structured in that manner. Alternatively the repayment schedule is based on variable interest. In both of these situations, it is important to look at refinancing the HELOC credit line in order to turn it into a long term loan with a fixed interest rate. Leaving the HELOC as a variable interest rate loan leaves you at the mercy of market trends and whims.
A HELOC credit line is an important option to consider when your financial needs include items that have costs spread over a period of time such as home renovations and college tuitions. They are also a good choice to pay off high interest credit cards. For many people, the convenience of being able to withdraw money as it is needed, combined with paying interest only on the money they use make a HELOC credit line especially attractive.