Home Equity Line Of Credit


A HELOC, or home equity line of credit, is another option for debt consolidation. A home equity line of credit is similar to a credit card in that an initial loan amount is given, and the balance can be drawn upon at any time during the term of the loan. A home equity line of credit has an interest-only payment for the first 10 years of the loan, and balloons thereafter. This means the entire balance of the loan must be paid upon completion of the 10th year of the loan, or the borrower may refinance at that time. Home equity line of credit interest rates are calculated using a combination of the Prime interest rate (at the time of the loan), plus a margin. A home equity line of credit has low premiums (interest rates), and thus yield low monthly payments. The Prime interest rate has historically been very stable and can only change quarterly, as determined by the Federal Trade Commission. This type of mortgage also uses your home as collateral for the loan, like the other debt consolidation mortgages available.