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March is drawing to an end and spring is in full swing. While the season change may provide a breath of fresh air, it may also come with new expenses. If you need to make home repairs, cover the cost of a wedding or pay for a wide range of potential expenses, you may be looking for the most affordable way to do so. One option is a home equity line of credit (HELOC).
HELOCs are lines of credit that make it possible to borrow against your home equity. These lending options typically come with relatively low interest rates because they’re secured by your home. So, if you need to cover large expenses this April, a HELOC could be an effective way to get the money you need.
Find out how much money you can access with a HELOC now.
3 reasons to use a HELOC this April
The average American homeowner has quite a bit of equity at their fingertips – about $299,000 worth. Although you can’t usually tap into 100% of your home equity, you can typically access a significant amount of it. The average American homeowner can safely access around $193,000 of their equity right now. So, what are the benefits of using a HELOC to cover large expenses this April? Here are three:
Rates are still lower than popular alternatives
The biggest cost that’s typically associated with borrowing money is interest. And in today’s high interest rate environment, it’s important to look for low rates when you compare your borrowing options. HELOCs typically fit that bill.
Today’s average HELOC interest rate is 9.01%. That low rate can offer significant savings over popular alternatives. The average credit card interest rate hovers near 20% currently while the average personal loan interest rate is about 12%, according to Bankrate.
Find out how affordable a HELOC can be today!
Variable interest rates could position you for savings ahead
Significant COVID-era inflation led the Federal Reserve to push interest rates to the heights we see today. The federal funds rate is currently frozen at a 23-year high. Although the inflation rate continues to outpace the Federal Reserve’s 2% target, and there have been months with upticks, the overall inflation rate trend since it hit 9.1% in June of 2022 has been a downward one.
As inflation continues to cool, experts expect the Federal Reserve to reduce its federal funds rate multiple times in 2024. That’s important because the federal funds rate is the primary benchmark for consumer interest rates. Should the Fed cut its rate later this year, consumer interest rates will likely follow.
That’s good news if you opt for a HELOC since these loans typically come with variable interest rates. If the Federal Reserve does cut rates later this year, the cost of your HELOC could fall.
Your interest may be tax deductible
If you plan on using your HELOC to make spring home repairs or renovations, there’s an added benefit to consider. According to the IRS, “interest on home equity loans and lines of credit are deductible only if the borrowed funds are used to buy, build, or substantially improve the taxpayer’s home that secures the loan.”
So, while you can’t deduct your interest if you use a HELOC on your first home to repair your second home and vice versa, your interest may be deductible if you use your HELOC to repair the home that secures it.
Compare your HELOC options now to get your hands on the money you need.
The bottom line
If you’re in need of a competitive cost loan this April, a HELOC may be what you’re looking for. These loans typically come with lower rates than other popular options because they’re backed by your home. Moreover, interest rates on these loans are usually variable, giving you the ability to take advantage of expected rate cuts ahead. Finally, depending on how you plan on using your HELOC, your interest may be tax deductible.
Joshua Rodriguez is a personal finance and investing writer with a passion for his craft. When he’s not working, he enjoys time with his wife, two kids and two dogs.
