3 advantages HELOCs have over other credit options right now

While many Americans were hopeful that the worst of this inflation cycle was over, recent reports have dampened that optimism. Inflation increased in February and March, all but ensuring that today’s high interest rates designed to tame it will remain elevated — and possibly tick up yet again. One Fed official has already discussed tabling rate cuts for the remainder of 2024 — and that was prior to the most recent disappointing inflation report.

That’s bad news for borrowers, many of whom have already been dealing with higher interest rates on credit cards, personal loans and other popular credit options. With today’s inflationary climate, then, it behooves borrowers to explore their alternatives. For homeowners, in particular, this can take the form of home equity borrowing via home equity loans or home equity lines of credit (HELOCs). 

The latter, form, in particular, has unique advantages borrowers may want to explore right now. Below, we’ll break down three of them.

See how much you could borrow with a HELOC here now.

3 advantages HELOCs have over other credit options right now

Here are three major advantages of using a HELOC right now.

Lower interest rates

While today’s home equity loan and HELOC interest rates haven’t been immune from a rising rate environment, they’re still significantly lower than what you can secure with the alternatives. Credit card interest rates sit around 20% right now while personal loan interest rates are approaching 13%, on average. 

However, HELOC rates are currently around 9%. That’s a big difference for borrowers and can add to significant savings. Granted, part of that difference is because your home is being used as the collateral. But if you know you can pay back what you borrow on time, these lower rates are worth pursuing.

Explore multiple HELOC options online today.

The potential for even lower rates ahead

Sure, a cut to interest rates seems further off than many had hoped for at the moment. But if inflation gets back under control and the Federal Reserve feels confident in its downward trend, it’s certainly possible (if not likely) that interest rate cuts will be issued. That could be a big boost for HELOC borrowers because interest rates on this credit form are variable, meaning that they will adjust as the rate climate evolves. So, if the overall rate environment drops, the rate you pay on your HELOC will too, putting money back in your pocket with no extra work done on your behalf.

There’s a lot to utilize

Forget about asking to raise your credit card borrowing cap. While that can be a slight help, the average homeowner has around $300,000 worth of home equity right now, around $190,000 of which is accessible, according to a recent report. So, you may have a lot to utilize right now. 

And if you’ve paid off a significant amount of your home loan, or live in one of the many regions of the country that has seen a rise in home values, you may even have more to borrow right now. But because home equity is calculated by deducting your mortgage amount from your home’s appraised value, it may make sense to pursue a HELOC now while the numbers are still favorable.

The bottom line

With interest rates high for borrowers right now, it’s important to explore all options. A HELOC could be a better one for many borrowers. Because of its lower interest rates (compared to popular alternatives), the potential for lower interest rates ahead and a substantial average amount of equity owners may be able to tap into now, this could be the best credit type to pursue right now while inflation and interest rates are still higher than many would like. As noted, just be sure to carefully weigh the pros and cons of HELOCs, as you could potentially lose your home if you don’t pay back what you borrow on time.