Why you should get a home equity loan now
With the effects of inflation being felt everywhere from grocery shopping to veterinary care, many Americans find themselves looking for new and cost-effective ways to make ends meet.
While traditional credit options like credit cards and personal loans may be beneficial, both typically come with high interest rates. If not managed correctly, these credit types can actually put the borrower in a more precarious credit position than they were when they started.
Fortunately, millions of homeowners have a low interest alternative to pursue: the equity they've accumulated in their homes. By using a home equity loan, homeowners can help pay for expenses both large and small, and they won't need to pay exorbitant interest rates to get the help they need.
There are multiple benefits to using a home equity loan, particularly in today's uneven economic climate. In this article, we will break down three reasons homeowners should get a home equity loan now. If you think you could benefit from this credit option, start exploring your local offers here now.
Why you should get a home equity loan now
Here are three reasons you should consider getting a home equity loan now.
You may have more equity to use
Interest rate hikes haven't been great news for prospective homebuyers and owners looking to refinance, but in some parts of the country, they've had a negligible influence. In fact, home prices actually rose in 40 major cities in February, CBS News reported. If you find yourself living in one of those cities, or in another area of the country that's experienced a jump in home values, then you have more equity to use with a home equity loan.
Remember: Home equity isn't just determined by how much you've paid toward your mortgage principal. It also takes into account your home's current worth. So even if you've only made a small dent in your mortgage loan, but you've seen your home's value rise significantly, you may be able to take out a substantial home equity loan.
See how much you can get here now.
Rates are lower than other credit forms
To effectively pay for expenses, you want to secure the lowest-interest option available. If you do your research (and have a good credit score), you'll find home equity loans typically have rates lower than other credit forms.
How much lower? The average interest rate for a credit card is currently around 20%. For personal loans, it's been about 11%, according to the Federal Reserve. A home equity loan, at the same time, is approximately 7%. It's possible you could get a rate even lower, so shop around before signing on the dotted line.
Rates are fixed
In today's climate, any certainty you can inject into your finances and monthly budget should be welcome. A home equity loan can help in this sense because its rates are fixed. The interest rate you secure at the time of application will be the same one you pay throughout the term of the loan.
Compare this to a HELOC, which also has lower interest rates but maybe not for long. HELOCs often come with adjustable rates that can fluctuate based on market conditions and other factors. That could be welcome when rates are low but quickly become problematic as rates increase.
If you want a low-interest credit option that will remain a low-interest credit option, a home equity loan may be best for you, especially now.
The bottom line
When times are tough and inflation is rampant, consumers need to be judicious about the credit they use to make ends meet. While many people turn to credit cards or personal loans, homeowners should consider utilizing the equity they've built in their homes.
Home equity loans are particularly advantageous now as many owners are sitting on substantially higher home values than they were just a few years ago. Rates on these loans are also generally lower than most other credit alternatives, and those rates are fixed, providing the homeowner some much-needed predictability for their budget.
