Home equity line of credit (HELOC) rates for loans with a 10-year repayment period are holding steady at 5.49% for the third straight week, according to Bankrate data from the week ending August 1. Rates on 20-year HELOCs also remained fairly unchanged at 7.26%, up from 7.25% the week prior, and 30-year HELOCs continued to decline to 5.84% down from 5.93% the week prior. (See the lowest rates you may qualify for here.)

Who might a HELOC work for?

HELOCs can be a smart option for borrowers who want to consolidate high-interest debt or fund home improvement projects because they tend to be one of the most affordable loan types for homeowners with significant equity in their homes. But because of the collateral provided, it’s important to remember that if you don’t repay a HELOC, you could lose your home. 

How do HELOCs work?

HELOCs are composed of a two-part structure; most commonly a 10-year draw period and a 20-year repayment period that together equal a 30-year term. During the draw period, a borrower can withdraw as much or as little money as they like, in small increments or a lump sum. Once the repayment period begins however, money can no longer be withdrawn and the borrower must pay back the principal in addition to interest. Because HELOCs are based on the amount of equity someone has in their home, the amount of money a borrower qualifies for will vary.

How to get the best rate on a HELOC

Borrowers with higher credit scores, lower debt-to-income (DTI) ratios and substantial equity in their home tend to get the best rates on HELOCs, often with lower interest rates than they’d receive on credit cards or personal loans. To calculate your DTI, add up your monthly bills including your house payment, credit card, child support, insurance, other debts, etc. and divide the total by your gross monthly income. The number that lenders are looking for you to churn out should be 36% or lower to ensure you not only get approved, but to help you get the best rates and terms on a HELOC.