Pros and Cons of HELOCs

Blog posted On December 22, 2022

HELOCs have been all the rage in 2022. Because of the flexibility of a home equity line of credit (HELOC), the number of new HELOCs jumped to more than 341,000 in the second quarter of 2022 — a 44% increase year-over-year, according to ATTOM. In the second quarter alone, homeowners tapped more than $66 billion in equity. Many buyers and owners have made the jump into HELOCs this year – for good reason. If you’re wondering if it’s right for you, here are some pros and cons to weigh out.


  • Lower Annual Percentage Rate (APR) – Compared to APRs for credit cards and other personal loans, starting APRs for HELOCs are relatively low.
  • Tax-deductible interest – Interest may be tax deductible for homeowners or buyers who use their HELOC to “buy, build, or substantially improve” their home.
  • Less owed on compound interest – Unlike personal loans or cash-out refinances, HELOCs aren’t a lump-sum payment, they’re a revolving line of credit. This means you only use what you need and are only charged interest on what you withdraw, which can potentially help save money on debt
  • Flexible repayment options – Repayment durations are usually 10, 15, or 20 years following the draw period. However, you also have the option to start repayment during the draw period, which will cut down on the overall interest paid.
  • Improved credit score, consolidated debt – If you set up autopayments and continue making them on-time, you’ll likely see improvement in your credit score. You could also use your HELOC to consolidate high-interest debt (like credit card debt).
  • Fewer restrictions – You can use your HELOC funds however you need or want –home renovations, debt consolidation, medical expenses, etc.


  • Risk of overspending – It’s important to watch how much you spend when using a HELOC. It may be tempting to max out your HELOC loan credit limit. Just remember that on top of that amount, you will be charged interest for what you use.
  • Good credit = Larger HELOC limit (typically)- With all other things being equal, higher credit scores will likely result in a larger HELOC limit – just like getting a new credit card. So if your credit isn’t where you’d like it to be, check out our credit improvement tips before applying for a HELOC.
  • A smart debt, but still a debt – While there are several advantages to using a HELOC, it’s still money and payments that you will need to ensure you can make – just like any other mortgage.
  • Funds desired – If you’re only looking for a small sum of money, there might be better options out there than a HELOC.

If you’re wondering if a HELOC is right for you, let us know. We would be happy to explore options with you!


Sources: Bankrate, Money