What Is a Home Equity Line of Credit and How Do You Apply?

If you qualify for a home equity line of credit, you should thank your lucky stars as many people don’t have that option. For most people the only line of credit they can get is through credit cards and such, but folks with homes have more options.

For example, a home equity line of credit is one of the avenues that you can consider when you’re looking for a line of credit if it’s not possible to live on what you make alone. This is the type of line of credit that you get by using your home as collateral. 

To learn more about the Home Equity Line of Credit, you should read on. Information on what it takes to get this line of credit today and how you can apply can also be found here. The information will also help you determine whether you should utilize this option or not.

What is a Home Equity Line of Credit and How it Works

Your home is essentially the collateral for the loan that you get here. Another part that you need to take into account is that the loan is secured against the available equity in your home. That’s the major factor when you’re looking at this line of credit.

Essentially, you take money from the available equity in your home. When you pay that money back, your equity returns to what it was before the loan. So you can get a home equity loan and then draw from it what you need. 

The draw period for this type of loan is around 10 years, after which the repayment period commences and that can be up to 20 years.

Interest Charged on HELOC

Like any other line of credit that you’ll find in the market today, there are some charges that you have to part with when it comes to a Home Equity Line of Credit (HELOC). Each bank that offers this LOC offers it at a different rate and with different fees.

There are, however, set standards for the rate which these lines of credit can operate on. The average rate which you can expect is around 7% that’s during the draw period. When the repayment period kicks in, the rate is slightly higher as it can be double that percentage.

There are closing costs when you consider this type of LOC. The fee here is much lower than the ones you usually get when you take up one-time loans.

How To Apply for a HELOC

There are a number of things that the lender has to consider before offering you a home equity line of credit and that includes your credit score. Your credit score should be stable if not impeccable for you to get a HELOC.

Secondly, the lender will look into your employment. These need to coincide with the requirements that are set by the different lenders. Just as much as a vigorous check process was done to help you secure a mortgage, the same will be done in this case.

To apply you need to have equity on your home. The amount you’re going to borrow should be less than the value of your home. And you can borrow upto 85% of the value of the house. You will have to consult your mortgage bank for further details.


Securing a line of credit against your home is a good idea when you’re going through tough times like losing your job due to COVID-19. You pay a lower interest rate than if you chose a different loan, but you will be putting your house up as collateral, so it’s a mighty important decision.