Home Equity Line of Credit (HELOC), a flexible line of credit secured by borrower’s property, is a great option for meeting with many out of budget expenditures that an individual or a household has to bear in this period of recession and growing unemployment. These expenditures may be educational fees, medical bills, home renovation cost, or buying a new car, for example. HELOC is the best method to draw instant cash from your home equity, and unlike other home loans you may draw it as needed while paying it back with sufficient time margin like long term home loans.


Here are top 5 reasons why to choose HELOC over other methods of credit:

1. Easy to draw funds like checking account

With a HELOC you can withdraw your money by writing a check as needed instead of waiting for your loan to close. The borrower gets a checkbook or check card from the bank providing HELOC for easy access to funds; this practice is adopted in most of the HELOCs. Thus borrowers have to go through loan sanction process just once at the time of application. For any subsequent cash-outs from their home equity, they don’t need to deal with any loan officer or lender. So, it is virtually a checking account.

2. Readily available funds to meet any emergency

Since the HELOC offers immediate withdrawal of cash through check, you can also use it to pay any recipient who accepts check for payment immediately in case of emergency. You can also repay your credit card bill through HELOC check to avoid late payment charges and extra interest. With HELOC, you don’t need to go through loan process again and again; it is more flexible than a traditional refinance. Thus you have liberty to use your HELOC to restructure your high interest debt.

3. Opportunity to harness home equity advantage without selling your home

An early HELOC also allows you to freeze the equity amount by setting present value of your house versus risking a lower approved equity value or sale price at a later date due to falling property rates in the market. HELOC gives you opportunity to spend your home equity profits in advance. You can even harness your home’s equity through HELOC without selling it.

4. Ability to finance home improvement project

Since HELOC offers a wide range of choices for you to use the funds, you can also use it for a home improvement project. Whether you decide to sell your home to buy a new one or just want to improve quality of living, you can readily use HELOC for improving quality of your home. This would increase your home’s desirability and sell value.

5. No fees to set up HELOC from most lenders

Most lenders are offering to setup HELOC without any service fee, unlike mortgages. With many banks offering HELOC, the process of setting up HELOC is almost free. There may be some annual fees to keep the checking account open even if you don’t withdraw cash. It is wise to ask your lender or broker for any hidden fees.

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