Home Equity Line of Credit (HELOC)

A HELOC is different than a conventional Home Equity Loan. The lump sum of money is not borrowed up front, but is a line of credit against the equity in your home which allows you to pull out money up to the allotted amount, similar to a credit card. At closing, you are assigned a specified credit limit that you can borrow up to. The terms of the loan are generally set between 10 to 25 years. HELOC funds can be borrowed at any time and you pay back only what you use, plus interest. Depending on how much you use the HELOC, you will have a minimum monthly payment which is required. The payment required is most often interest only (when you pay no principle to the loan, only interest to the bank) beyond the minimum; it is up to you how much to pay and when to pay. At the end of loan terms, you will have to pay back the full principal amount borrowed either in a lump-sum balloon payment or according to a loan amortization schedule.

HELOC's have some of the lowest interest rates and monthly payments of any consumer loans. These loans are often used for debt consolidation and are more flexible than traditional home equity loans. To obtain loan approval the process is generally easier and requires less documentation. You are not required to have mortgage insurance and the interest from the loan is tax-deductible. (See your financial professional for tax questions)

Personal Line of Credit (PLOC)

A Personal Line of Credit is an open end, revolving loan that allows the borrower to borrow money when they need it and provides a payment plan for paying off. A personal line of credits is based on an individual’s credit score and income. It gives home owners the option of a line of credit without using your equity as collateral. Borrow only the funds you need at the time you need them without having to reapply during the term of the line of credit. Access your available credit by check, ATM, phone or online.

Benefits of HELOC's and PLOC's

• Fast, Easy Application Process, Fast approval time (often closes within 48 hours)
• Easy access to funds: debit card, checks, online access
• Low fees or in many cases NO cost
• PLOC requires no collateral or equity in your home
• Most can be connected seamlessly with your traditional banking accounts

There many different banks that offer either a Home Equity Line of Credit or Personal Line of Credit option. The most important thing it to make sure line of credit includes the following:

Line of Credit Requirements

• Open end loan
• Revolving line with no fees or penalties for drawing from the line
• Low fees or in many cases NO cost
• No pre-payment penalties
• Interest must be calculated on a daily average balance

Additional Features to look for, but are not required

• No limit to the number of transactions transfers, or checks written
• No minimum dollar amount per transaction or transfer
• Allow the line of credit to be an overdraft protection to your checking's
• No fees for online banking, phone service or customer service
• Free access to transfer money to and from checking and line of credit