Compare that to personal loans which currently have an average rate of 11.08%, for example. Right now, the national average HELOC rate is 7.34%, according to Bankrate, CNET’s sister site. Securing the lowest interest rate possible will help save you tens of thousands of dollars over the lifetime of your loan.

HELOCs often have lower interest rates than other home equity loans, personal loans or credit cards. Since you can take out money as needed over a 10-year period, HELOCs can be beneficial when you want money for a long-term project but aren’t sure of the exact amount you need. HELOCs tend to have lower interest rates than other types of loans since they are secured by your home.

A debt-to-income ratio that is 43% or less.

A good credit score (most lenders prefer a score of at least 700 to approve you for their lowest rates, but you can qualify with a score as low as 620 with some lenders).

At least 15% to 20% equity built up in your home.

In order to qualify for HELOC loan approval, you will typically need to have:

HELOCs are revolving lines of credit that function similarly to credit cards and allow you to repeatedly take out money up to your total line of credit during your draw period (usually 10 years), which is the period of time when you can make withdrawals from your HELOC. What is a home equity line of credit (HELOC)?Ī HELOC is a home loan that allows you to tap into your home equity and access cash at a relatively low interest rate. While there can be significant benefits to using a HELOC, they have a notable downside, which is that you must put your home up as collateral to secure your loan. A home equity line of credit, or HELOC, can be a good option to finance a major life expense like a home renovation, consolidate debt or cover an unexpected emergency.

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