Financial Flexibility: The Case for the HELOC

David Jones, Lender — Spring Green

One of the most underrated products in banking today is the Home Equity Line of Credit or HELOC.

What is it? How can you use it? Why would you want to?

Consider this, in lending a crucial component of whether a loan is approved or not is collateral. The greater the value of the collateral, the less risk the financial institution must assume, the better the rate and a greater likelihood that the loan will be approved. A HELOC is exactly as its name suggests, a line of credit backed by the equity you’ve built in your home. Because the risk associated with the loan is minimized by the collateral, the rate on the line is generally more competitive than other types of loans.

Once approved, the line can be accessed at any time. The funds are commonly used for home improvements, tuition payments, and credit card or debt consolidation. But, they can also be used in case of an emergency, for a vacation or just about any other expense you can think of. Interest is only charged when the line is in use and, in most cases, the interest is tax deductible*.

In brief, I recommend a HELOC to all who qualify for one and have need of financial flexibility. In a pinch, those funds are readily available for any need at minimal cost to the borrower. Plus, the tax benefits cannot be overlooked. It really is an inexpensive safeguard.

*Consult your tax advisor