Why a HELOC may be worth it for you

Many people could use extra money, particularly in today's economy plagued by inflation and a looming recession. 

Only four in 10 Americans could pay for an emergency of $1,000 or more using funds from their savings account, a Bankrate survey from earlier this year found. With signs of economic relief murky, many Americans find themselves relying more on traditional credit options like credit cards and personal loans. While these may be helpful in certain circumstances, homeowners have a better alternative right under their own roofs: their home's equity.

By using their home's equity via a home equity loan or home equity line of credit (HELOC), homeowners can finance major repairs, renovations and expenses - often at a lower interest rate than many other credit options. HELOCs, in particular, come with unique advantages that may be worth it for homeowners looking for any edge they can get.

If you think you could benefit from taking out a HELOC, start by checking rates and eligibility here now.

Why a HELOC may be worth it for you

Here are three reasons why a HELOC may be worth it for you.

It's flexible

Unlike a home equity loan or a personal loan, HELOCs have flexible terms, so you can use them as you see appropriate. HELOCs operate as a revolving line of credit, and you only pay interest on what you use - not the full credit line you were approved to withdraw. This can be advantageous for multiple reasons, particularly if you're unsure of your long-term financial needs.

So, if you know you'll need a substantial amount of money soon but aren't sure of the exact figure, a HELOC can provide the flexibility your financial needs require.

Check your local HELOC options here now to see if a HELOC makes sense for you.

Rates are lower

One of the first things you'll notice when looking for a HELOC is the interest rates. They're notably lower than many other credit forms.

Credit cards currently hover around 20%, while personal loans are significantly lower but still in the double digits (think 10%, approximately). Compare that to a HELOC interest rate of around 7% (for those with the best credit) and you can see how much more you could be saving.

Many people use HELOCs and home equity loans to consolidate or pay off their existing debt because the rates on these options are significantly lower than what they're paying on their other debts. So if you owe money and want to pay it off smartly, a HELOC may be worth it for you.

Interest is tax-deductible

HELOCs are also commonly used to improve the homeowner's residence via renovation or repair. In these circumstances, the interest the borrower paid on the line of credit in the year they used it could be tax-deductible.

"Interest on home equity loans and lines of credit are deductible only if the borrowed funds are used to buy, build, or substantially improve the taxpayer's home that secures the loan," according to the IRS. "The loan must be secured by the taxpayer's main home or second home (qualified residence), and meet other requirements."

So if you know you need money for a major home improvement, a HELOC could be valuable.

Explore your HELOC options here now to learn more.

The bottom line

Not every financial product or service is appropriate for everyone. Many are specific to the individual and their financial situation. That said, homeowners looking for extra cash may benefit from turning to a HELOC. This credit option comes with flexible terms and significantly lower interest rates than some other credit options. And, if used for IRS-approved reasons, the interest could be deductible come tax season.