Is a HELOC a good idea? Pros and cons to consider.

Core Insights - A Home Equity Line of Credit (HELOC) allows homeowners to borrow against their home equity, functioning similarly to a credit card with a draw period and repayment period [1][2] Pros and Cons of HELOCs Pros - HELOCs typically have lower interest rates compared to other borrowing options, averaging just over 8% in June 2025, significantly lower than credit cards at 21.37% and personal loans at almost 12% [3] - Funds from a HELOC can be used for various purposes, including home improvements, debt consolidation, medical bills, college tuition, or as a financial safety net [6] - Interest paid on a HELOC may be tax-deductible if the funds are used to buy, build, or substantially improve the home [8] - Borrowers only pay interest on the amount withdrawn, not the total credit limit, allowing for cost-effective borrowing [14] - HELOCs provide extended access to cash, allowing homeowners to withdraw funds over a long period for various needs [11][12] Cons - A HELOC uses the home as collateral, posing a risk of foreclosure if payments are not made [4][17] - Interest rates on HELOCs are variable, which can lead to fluctuating monthly payments [7] - Borrowers must manage an additional monthly payment, which can complicate budgeting [9][10] - There may be various fees associated with HELOCs, including appraisal and closing costs [15] - Access to cash may tempt some borrowers to overspend, leading to financial strain [13]