Best HELOCs
A home equity line of credit (HELOC) is a type of second mortgage that uses your home's equity as collateral on the loan. While the collateral increases your risk, it lowers the lender's risk, often resulting in more favorable interest rates than with credit cards, personal loans and other financing options. Most HELOCs come with variable interest rates, although more lenders now offer fixed-rate options.
HELOC borrowing amounts range from $10,000 to $1,000,000, with repayment terms lasting up to 30 years.
As with most loans, shopping and comparing annual percentage rates (APRs), terms and fees can help you identify the best loan for your situation. You can get started by considering the best HELOC lenders here.
Best HELOCs
Here are some of the best HELOC lenders currently available.
- Best overall: PNC
- Best for low APR: Third Federal Savings and Loan
- Best for home improvement: PenFed Credit Union
- Best for debt consolidation: Citizens Bank
- Best for borrowers with excellent credit: TD Bank
- Best for borrowers with bad credit: Figure
Best overall: PNC
When looking for the best home equity line of credit, it's crucial to consider the line's interest rate, loan amount, draw period, repayment terms and fees. Working with a reputable lender with a reputation for solid customer satisfaction can also give you peace of mind.
Along those lines, PNC's home equity line of credit excels across the board, starting with competitive interest rates. When applying, you can choose between variable- or fixed-rate options for borrowing up to $1 million. Loan repayment terms are from five to 30 years, except in Tennessee, where terms are for five to 20 years.
PNC allows you to borrow up to 89.9% of your home's value, although the amount may be capped at a lower rate in some states. The amount you can borrow and your interest rate will depend on your creditworthiness, income and other factors. The biggest perk the lender provides is the ability to switch back and forth between fixed and variable rates for some of your HELOC during the draw period (the time frame when you can access funds), although you will incur a $100 fee whenever you lock or unlock a rate.
Best for low APR: Third Federal Savings and Loan
Third Federal Savings and Loan offers a variable 7.49% APR (as of December 2023). And if you receive a lower interest rate offer from another lender, you may be eligible for an interest rate match, or the lender may issue you a $1,000 check.
Third Federal also keeps your borrowing costs down by offering HELOCs with no closing costs or minimum draw requirements. HELOCs come with a 10-year draw period and a 30-year repayment period. While such a lengthy repayment period can make your monthly payments more affordable, be aware that you'll pay considerably more in interest than you would with a shorter repayment term.
Best for home improvement: PenFed Credit Union
Need to move fast on a home renovation project? If you qualify, PenFed Credit Union's home equity line of credit could give you access to your home's equity in as few as 15 days. The amount you qualify for will depend on your credit and other factors, but it's nice to know PenFed offers borrowing amounts for any budget, from $25,000 to $500,000.
As of December 2023, HELOC APRs were as low as 8.625% with a 10-year draw period and a 20-year repayment period. According to the IRS, you may be able to write off the interest on any amount you withdraw if the funds are used to "buy, build, or substantially improve the home." Consult with your tax accountant for more information.
To qualify for a HELOC, you'll have to become a PenFed Credit Union member. Fortunately, anyone can become a member, and you can open a savings account with a $5 minimum deposit.
Best for debt consolidation: Citizens Bank
According to data from the Federal Reserve, the average credit card interest rate is 20.92%, and some credit cards carry interest rates as high as 36%. If high-interest credit cards are damaging your finances and making it difficult to manage your bills, you may want to consider consolidating the debt with a lower-interest option, such as a personal loan or HELOC. Interest rates on personal loans are typically higher than with HELOCs, but they don't require you to use your home as collateral.
Citizens Bank offers a HELOC with an 8.50% variable interest rate and a credit line of up to $400,000. The lender offers fast funding in as little as two weeks from application to funding. While Citizens doesn't charge set up or appraisal fees, they do charge a $50 annual fee during the draw period after the first year.
Best for borrowers with excellent credit: TD Bank
Most HELOC lenders add a margin on top of the U.S. prime rate as part of their APR calculation. Consequently, your variable rate APR can fluctuate as the prime rate rises and falls.
With good credit, among other factors like loan amount and what type of property you own, you could qualify for a TD Bank HELOC with a low variable rate, and you can qualify for a 0.25% discount by maintaining a TD Bank checking account. You also have the option to lock in some or all of your credit line at a fixed rate with no set-up fees.
A TD Bank HELOC doesn't have a minimum draw requirement, either, meaning you can withdraw only as much as you need up to your credit to save on interest charges.
Best for borrowers with bad credit: Figure
If you've struggled to get a loan elsewhere due to your credit, you can take steps to improve your credit before applying. Or, some lenders work with bad credit borrowers. Figure's minimum credit score requirement is 600, but as with most lenders, you'll likely pay higher interest rates if your credit score is poor.
Figure's home equity line of credit offers borrowing limits from $15,000 to $400,000. According to the lender, you may receive approval in five minutes and funding as quickly as five days. The entire application and funding process can be completed online, but be aware you will have to pay an origination fee of up to 4.99% of your initial draw on your HELOC.
The bottom line
Most financial experts advise against risking your home to borrow money. If you have insufficient equity, unstable income or a high debt-to-income ratio, adding a HELOC to the mix could increase your financial strain and make it challenging to manage your debt.
However, a HELOC or home equity loan may make sense if you have a legitimate need, such as consolidating debt or covering home improvements that could increase your home's value. Before you apply, consult with your financial advisor or tax accountant to ensure a home equity line of credit is a worthwhile option that aligns with your financial goals and aspirations. Learn more by reviewing your options and eligibility here now.
