Question:

What are the pros and cons of home equity line of credit (HELOC)?

Answer:

The pros and cons of home equity line of credit (HELOC) are what differs them from a home equity loan in the first place.

Pros of Home Equity Line of Credit (HELOC)

For example, some advantages of a home equity line of credit (HELOC) are that it is a quick cash option that can be used much as a credit card - only when you need it; interest is accrued on the spent amount only, and a HELOC rate is usually tied to a prime with 1 percent over it. A HELOC lets you borrow only what you need and repay basically when you feel like it and is good for short-term financing needs.

Also, many borrowers who have paid their first mortgages are using HELOCs as a quick access to equity.

Cons of Home Equity Line of Credit (HELOC)

The main disadvantage of a HELOC is that those home equity lines of credit are so easy to access that borrowers usually tap more of their equity than they actually need and exhaust equity unreasonably. It is recommended that a HELOC is used wisely and sometimes there are other cheaper ways to borrow money.

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