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From credit cards to personal loans, high interest rates are putting pressure on households. As a result, many homeowners have turned to Home Equity Lines of Credit (HELOCs).
In the fourth quarter of 2024, consumers increased their balances on HELOCs from $9 billion to $396 billion. So, what’s behind this surge in HELOC demand, and why are more homeowners turning their homes into a source of financial leverage? Let’s take a closer look.
Rising Home Equity
Over the past few years, property prices have steadily increased due to high demand and limited supply. With more equity in their homes, people are realizing they’re sitting on a powerful financial opportunity.
A HELOC from AmeriSave allows you to borrow money against the equity in your home. You can borrow, spend, and repay as needed, and only pay interest on the amount you’ve taken. Rising equity gives homeowners greater borrowing power. Lenders readily approve larger lines of credit, and that’s something incredibly appealing in this age of inflation.
The bottom line is that a HELOC allows homeowners to turn a static asset into a lucrative financial tool. With equity steadily increasing, more and more homeowners are jumping on the bandwagon.
Lower Interest Rates
When you acquire a HELOC, your home acts as collateral, which means lower interest rates. HELOC is an attractive option for homeowners looking to borrow money without getting buried under interest charges.
Overall, HELOCs are much cheaper than home equity loans. For instance, as of January 2025, the average HELOC rate is 8.36% nationwide, whereas the average home equity rate is 8.41%. The difference might seem minute, but it can translate into meaningful savings over time.
Flexibility and Access
Most home equity loans and personal loans offer a lump sum, which has to be repaid in full (with interest), whether you use all the money or not. This is not the case with HELOCs. A HELOC allows homeowners to borrow as needed and only repay what they use. So, if you end up using less cash than previously thought, you’ll make smaller repayments, too.
Moreover, HELOC funds are incredibly easy to access. You can use debit cards, ATM withdrawals, and checks.
Rising Interest in Home Improvements
More and more people are realizing the importance of remodeling their living space. The need for a comfortable, functional, and personalized living space has surged. But big renovations come with big price tags.
With a HELOC, you can finance home upgrades without draining your savings. Whether it’s converting your basement into a home office or upgrading bathroom hardware, a HELOC is ideal for all home improvement projects.
Debt Consolidation
A HELOC allows homeowners to pay off high-interest debts like credit cards, personal loans, or even medical bills. You can streamline multiple payments into one manageable monthly bill, ensuring peace of mind. A HELOC can be your first step towards escaping the debt cycle and reaching financial stability.
Debt consolidation can also boost your credit score and your future borrowing potential.
