How to get a HELOC? – The process of getting a HELOC is a lot like getting a mortgage loan, a cash refinance loan, or a home equity loan for yourself. However, there are differences between them too. The thing that sets HELOC (Home Equity Line of Credit) apart is that it is quite similar to that of a credit card – you can borrow as much money or as little as you want. However, you will need to stay within the agreed credit limit.

In this article, you will learn about a home equity line of credit and how it works. Then, you will get a detailed idea of how to get a home equity line of credit for yourself in 2023. Apart from that, we will also discuss with you the various requirements and eligibilities that you will need to fulfill if you want to get a HELOC for yourself. Hence, to learn more about HELOC, read on through to the end of the article.

What Is HELOC?


According to Investopedia, “Home equity loans and HELOCs use the equity in your home—that is, the difference between your home’s value and your mortgage balance—as collateral. As the loans are secured against the equity value of your home, home equity loans offer extremely competitive interest rates—usually close to those of first mortgages.

Unlike various less-secured sources of borrowing like credit cards, with HELOC, you will need to pay a lesser amount of financing fees for the same loan amount you borrow. However, there is a big disadvantage here – you are putting your home as collateral for the loan you are borrowing.

The difference with credit cards is that with HELOC, the loan amount is split into a draw and repayment period. The draw period ranges from five to fifteen years. Within this draw period, you can make withdrawals up to your credit limit and will need to make certain interest payments.

What the lenders do is they place someone or some entity as a second lien on the home that you are keeping as collateral for the loan. If you fail to make payments, the lenders give the second lien with rights to your home along with the first mortgage lien. Hence, the bigger your borrowing amount, the more your house is at risk of separation from your ownership.

However, the better side is that the terms of repayment can go up to thirty years, based on the conditions put by the lender. Furthermore, you can access the loan amount up to 80% of your home’s equity with a HELOC option. 

How Does The HELOC Work?

How Does The HELOC Work

According to, “A home equity line of credit is a form of revolving credit — much like a credit card. When using a credit card, you have a credit limit and you can spend your credit up to that specified amount. As you make monthly payments toward the balance you spent, your available credit is replenished. A HELOC works in the same fashion.

The biggest difference with credit cards is that you are borrowing against the equity in your home. This is how you can establish the line of credit in this case. 

The HELOC also depends on two major factors – the draw period and the repayment period. During the former period, you will be able to borrow money up to a specified limit, pay back, and borrow multiple times until the end of the period. The repayment period starts after the end of the draw period. You will get 10-20 years to pay the principal and interest on a monthly basis.

As it goes without saying, you will need to own a home and must have available credit in it. You will need to keep in mind here that the amount that you owe in the home will need to be less than the market value of the home. Furthermore, you will also need to have a good debt-to-income ratio, along with a good credit score, if you want to get a home equity line of credit.

How To Get A HELOC?

How To Get A HELOC

Firstly, you should be aware of the HELOC rates.

According to Nerdwallet, “Rates will vary by lender, and the annual percentage rate, or APR, that you’re offered will depend largely on factors like your credit score, your existing debt, and the amount you wish to borrow. However, most HELOC rates are indexed to a base rate called the prime rate, which is the lowest credit rate lenders are willing to offer to their most attractive borrowers.

Once you are aware of the rates, here are the following steps to follow if you want to get a HELOC:

Step 1: Check your financial situation, like your income and credit score, to check whether you can pay back a big loan or not.

Step 2: Check whether your needs are met with home equity loans, personal loans, or credit cards.

Step 3: Make sure you have enough money and your home has enough equity power to qualify for a HELOC.

Step 4: Decide how much money you will need to borrow and for what purpose you are using that money.

Step 5: Look for rates from a variety of lenders to check which one is the best suited for your case.

Step 6: Make sure you have all the required documents and information for your HELOC application.

Wrapping Up

Hope this article was helpful enough for you to get an idea of how to get a HELOC in 2023. If you want to make large purchases, make alternative debt payments, or want cash for big renovations, the HELOC is a great option for you. However, consider reviewing your financial situation before you jump into getting a HELOC for yourself.

Make sure that you are getting a HELOC for yourself only when you really need a big chunk of money for a major purchase or to pay a big debt. Do you think the HELOC is a better option than home equity loans when it comes to big payments? Share your thoughts and ideas with us in the comments section below.

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Soumava Goswami
A passionate writer and an avid reader, Soumava is academically inclined and loves writing on topics requiring deep research. Having 3+ years of experience, Soumava also loves writing blogs in other domains, including digital marketing, business, technology, travel, and sports.

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