The latest HELOC rates, and the pros and cons of a home equity line of credit - MarketWatch

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Home equity line of credit (HELOC) rates ticked up slightly this week with rates for 10-year loans hitting 3.99% and for 20-year loans 6.02%, according to the latest rates from Bankrate for the week ending March 21st. You can see the lowest rates you might qualify for here. 
HELOCs allow homeowners to borrow against the equity they have in their home and receive funds in the form of a line of credit that can be tapped into on an as-needed basis. That you can use the funds on an as-needed basis can be a big plus for people who are doing something like a home remodel and don’t know how much money they will need.

HELOCs, which are loans secured by your home, traditionally have favorable interest rates (see the lowest rates you might qualify for here) compared to other types of unsecured loans, and they can be used for a variety of purposes such as high-interest debt consolidation, home improvements and unexpected expenses.
While HELOCs are appealing because of their low rates and flexibility, defaulting on a HELOC repayment can mean losing your home. And repayment terms can be complicated and can fluctuate because of their often-variable-rate nature. (Fixed-rate HELOCs do exist, but they’re just less common.)
Indeed, repaying a HELOC works a bit differently than other loans. Firstly, HELOCs contain a draw period, which is typically a 10-year period in which a borrower can withdraw from their line of credit while only paying interest. After the draw period,  you usually can’t use that line of credit anymore, and the repayment period begins — a time in which a borrower pays back  both principal and interest, likely over a 20-year period. 
When taking out a HELOC, it’s important to consider that you may not get as much money as you think, because lenders often want borrowers to retain a 20% equity stake. That said, HELOCs are a popular choice for home improvement projects that may require more or less money than initially anticipated because the borrower can choose how much of the loan they want to tap into. 
Be prepared to share a lot of documentation with the lender, who might ask for things like: property and mortgage information, personal information, employment and income verification, debt and other financial statements, insurance statements, and more.

To make sure you’re getting the best HELOC rates and terms, pros say you should get quotes from about 3-5 different lenders. Another pro tip:  ask the lender about any discounts you may qualify for.
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Alisa Wolfson is a reporter for MarketWatch Picks.
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