In the past year, inflation has steadily increased everyday prices for groceries, dining out, entertainment, gas, and utilities. We understand that this economic climate is starting to catch up with many people. As a result, many people rely on credit cards or withdraw from their retirement accounts.

The effects of inflation can be a setback; However, a home equity line of credit (HELOC) offers a smart alternative to manage financial pressures without high-interest debt or depleting savings.

What is a HELOC?

HELOC stands for Home Equity Line of Credit. It allows you to borrow money against the value of your home.

For example, if your home is worth $300,000 and you owe $100,000 on your mortgage, you have $200,000 in equity.

While a traditional home equity loan provides the borrowed funds upfront, a HELOC offers much greater flexibility. Lower rates and longer terms of HELOCs make repaying the borrowed funds manageable.

• Revolving Credit: HELOCs are similar to credit cards. If you borrow $5,000 from a $50,000 limit, you must begin payments on the $5,000. The remaining $45,000 is still available to withdraw, and once you repay the $5,000, the whole $50,000 will become available again.

• Lower Interest Rates: Because HELOCs are secured loans, their interest rates are significantly lower than those of unsecured loans, such as credit cards or personal loans.

• Repayment Terms: The loan terms on HELOCs are much longer than other loans. Longer terms help to lower your monthly payments.

Ways to Use a HELOC to Fight Inflation:

• Maintaining Retirement Savings

Pulling money from your retirement early could mean facing penalties and taxes. You could also risk not having enough funds when the time for retirement comes. A HELOC might be a good alternative to pulling money from your 401k or IRA.

• Consolidating High-Interest Debt

Do you have too many high-interest credit card balances? You can trim expenses from your budget and free up funds when you consolidate high-interest debt with a HELOC. A lower-rate HELOC can save you money every month and improve your debt-to-income ratio.

• Covering Unplanned Expenses

When money is already tight, nothing causes more financial stress than unexpected costs. Whether it’s medical expenses, home repairs, or sudden spikes in monthly bills, having the extra funding can alleviate the stress of unplanned expenses.

One of the greatest perks of a HELOC is that it’s always available. Most HELOCs have a 10-year draw period, meaning the money is there for ten years should you need it. If you never use the money, it doesn’t cost you anything. You only pay interest when you withdraw funds.

Advice for Maintaining a HELOC

A HELOC is a powerful financial tool for homeowners. However, home equity loans use your house as collateral. Avoid using these funds recklessly. Having a $50,000 limit available doesn’t translate into a spending spree. The last thing you want to do is risk your home over careless spending.

When used responsibly, a HELOC can provide relief from inflation and rising costs. Anytime you borrow against your home, it’s essential to create a plan to repay the funds quickly.

Apply for a HELOC now.

We’re Here to Help!

Economic fluctuations will impact your finances, whether it’s inflation or a recession. The best course of action is to maintain a well-funded emergency savings account to help weather the fiscal storm. However, if you’re struggling, there are solutions and financial counseling available.

If you’re interested in speaking with a member of team about a HELOC, we’re always available. Reach out to us using the chat feature on the bottom fight corner of www.familytrust.org, the Family Trust App, or stop by any of our convenient branch locations or call 803-367-4100 today.