HELOC Mistakes to Avoid – CBS News

A Home Equity Line of Credit (HELOC) can be a cost effective way to finance everything from home improvement at your leisure HELOCs allow you to access the value you build in your home, often at substantially lower rates than options like credit cards and personal loans.

But to get the most out of a HELOC — and prevent financial problems — it’s important to use this product wisely There are many traps homeowners fall into with HELOCs, each of which can be quite expensive. In this article, we’ll discuss some of the most common ones and how to avoid them.

Check today’s HELOC rates to see how much you can borrow

Avoid HELOC mistakes

Knowledge is power. Understand the following HELOC mistakes so you don’t make them yourself

Apply with a low credit score

yours Credit score The HELOC rate you receive plays a big role. Most lenders look for scores in the mid to high 600s, but those 700 or higher qualify for the best rates. So if your score is low, take time It is advanced Before you apply so you don’t end up paying more interest than necessary.

Start exploring your HELOC options by reviewing current rates here

Not shopping around

You have plenty Options to choose from When it comes to taking out a HELOC, and they come with a wide range of rates, terms and fees. Don’t just settle for the first offer that looks good. Also take time to compare multiple lenders Your primary mortgage lender Find the best deals available.

Borrowing more than you can afford

A HELOC A revolving line of credit is like a credit card, meaning you can borrow from it whenever you want as long as you stay within your credit limit. However, this flexibility can be a double-edged sword if it leads to overspending or impulse buying.

Borrowing too much leaves you with a heavy debt load, which can strain your finances. So, before you take out a HELOC, make sure you have a clear purpose for the funds, identify how much you actually need, and borrow only that amount.

Also, make sure you can comfortably repay the amount you borrow. Failure to make timely payments can result in late fees, a low credit score and even foreclosure since the loan is secured by your home. HELOC rates are variable, so review your budget to make sure you won’t have trouble making payments on time, keeping in mind that your payments may increase in the future.

Find the best HELOC for you by comparing offers online now.

Don’t read the fine print

As with any financial product, it’s important to read and understand all of the terms and conditions of a HELOC. Some lenders may charge high upfront fees, annual fees or prepayment penalties — and some of these fees can be buried in long blocks of text.

It may seem tedious, but take the time to read everything before signing on the dotted line. Knowing exactly what you’re agreeing to will help you make an informed decision and protect you from negative consequences you didn’t expect.

Bottom line

A home equity line of credit can be A helpful financial tool When used correctly. By applying with a good credit score, shopping around, borrowing only what you can afford and reading the fine print carefully, you can avoid the common HELOC mistakes many homeowners make and use this product to your best advantage.