Should you get a HELOC? Here are the pros, cons, and alternatives

Homeownership has some advantages when you need cash. You could use a HELOC to tap into your home's value and get money for emergencies, home repairs, debt consolidation—you name it. 

Should I get a HELOC? It's a good question and here's the tl;dr answer: a HELOC could better fit some situations than others. 

It helps to know the facts before you make a decision. Let's look at how a HELOC works, the pros and cons, and when it makes sense to use one. 

What is a HELOC and why consider one? 

HELOC stands for home equity line of credit. Home equity is the difference between what you owe on your home and what it's worth.

When you get a HELOC, you have an initial draw period in which you can access funds. In other words, you can borrow, repay, and borrow more as often as you like, up to your limit. Once the draw period ends, you enter the repayment period and can’t borrow more. 

You’ll have a payment during both the draw period and the repayment period. The payment amount could change during the draw period if your balance changes, or at any time if your interest rate changes. 

Lenders decide how long the draw and repayment periods last. Achieve's home equity line of credit, for example, has a five-year draw period. Repayment terms are 10, 15, 20, or 30 years. 

A HELOC is a mortgage loan guaranteed by your home. HELOCs offer flexibility, since you can use the money for virtually anything. HELOCs are a popular loan option for homeowners for several reasons.

• HELOCs offer a fast way to borrow money at lower rates. If you have good or excellent credit, a HELOC could be cheaper than a personal loan or a credit card. 

• The amount you could borrow with a HELOC is often more than you could get with another kind of loan.

• Interest paid on a HELOC could be tax-deductible. 

• With a HELOC, you can borrow from your credit line, pay it back, and borrow again as many times as you like during your draw period. 

HELOCs aren't the only way to borrow, but they offer some upsides that other loans or lines of credit don't. 

Situations when a HELOC might be a smart choice

Before you borrow from your home equity, it helps to consider the best uses for HELOC funds. Some of the most common reasons to get a HELOC include:

• Debt consolidation. If you have high-interest credit card debt, you could use a HELOC to pay it off. One of the biggest potential advantages is that you could bring your total monthly payment down to a more affordable level. You might also be able to lower the interest rate on your debt.

• Home repairs/improvements. Home improvements could increase your home's value, which can mean more equity. A HELOC could be a great way to fund improvements.

• Medical bills. Medical debt can quickly pile up if you have a serious illness or injury. You might use a HELOC to pay those bills off so you have just one debt payment to keep track of. 

• Emergencies. A HELOC could act as a stand-in for an emergency fund. If an unexpected expense comes along, you could use your HELOC funds to cover it. 

• Large expenses. A HELOC could be a suitable choice for large, planned expenses. For example, you might use your home equity to fund a wedding, pay for your child's college expenses, or replace your appliances. 

When you get a HELOC is just as important as why. The best time to get a HELOC (or any other loan) is when you can qualify for the lowest interest rates. If HELOC rates drop or your credit score goes up, that could be your opportunity to minimize the cost of covering a large expense. 

When a HELOC may not be the best choice

A HELOC could put cash in your bank account when you need it. Still, there are some HELOC risks to know. 

Here are some examples of when not to get a HELOC:

• You're uncomfortable with the idea of a line of credit that's secured by your home. HELOCs are tied to your property. The biggest risk of a HELOC is that if for some reason you’re unable to repay the loan, you could lose your home. 

• Interest rates may increase. Achieve's HELOC features a fixed interest rate which won't change, but other HELOCs may have variable rates. A variable-rate HELOC could become a headache if your rate increases. A higher interest rate makes it more expensive and triggers higher payments.

• Your credit could use some work. Fair or poor credit isn't a barrier to a HELOC, but it could make it more expensive. Even a small difference in HELOC rates could cost you a sizable amount of money over time.  

Are any of these reasons to never get a HELOC? Not necessarily. If you can improve your credit score, for example, or work out a solid budget plan for repayment, then a HELOC could still be a good choice. 

Example of when a HELOC is a good idea

Whether to borrow from your home's value is a personal decision, but it helps to have an example of when a HELOC could make sense. Here's a hypothetical view of how to use a HELOC wisely. 

Let's assume your home is worth $350,000 and you have $200,000 in equity. You decide to get a $50,000 HELOC to do some renovations. You end up withdrawing the entire $50,000 to fund your home makeover project. 

After renovations, your home's value increases by $75,000. You owe $200,000 on your first mortgage and HELOC, but the home is now worth $425,000. In this scenario, you've come out ahead in terms of your overall equity value. 

Even better, you’ve improved the quality of your daily life.

Ask yourself, What could I gain if I get a HELOC? 

Your answer could help you decide if a HELOC is a good idea

Pros and cons of getting a HELOC

Here are the main HELOC advantages and disadvantages to know. 

Pro: HELOCs are flexible

A HELOC could help you reach a big financial goals. You could use a HELOC for one thing or several things—it's up to you to decide. 

Pro: You might get a tax break

You probably know that the interest you pay on your primary mortgage could be tax-deductible, but that tax break also applies to HELOCs when certain conditions are met. In 2025, the IRS allows you to deduct HELOC interest if you use the money to build, buy, or substantially improve the home you borrowed against. After 2025, the interest could be tax deductible no matter what you borrowed for.

Tax deductions lower your taxable income, which could help you get a bigger refund. 

Talk to a qualified tax professional about your specific financial situation.

Pro: Potential for low rates

If you have good credit, a HELOC could offer a lower rate than other loan options. It's wise to compare variable-rate HELOCs to see what different lenders charge. With a variable-rate HELOC, the rate could go up or down over time. That means that not only could you pay more in interest, but your payment could also increase. 

A fixed-rate HELOC may be preferable if you can lock in a low rate for the long term and want some certainty about your monthly payments. 

Con: Tied to your home

HELOCs are guaranteed by your home, so if something unforeseen happens and you can't make your payments, you could lose your home. A foreclosure is likely to hurt your credit, too. 

Con: Decline in home value

In a perfect world, your home value only goes up, but that doesn't always happen. If there were a major economic downturn, like the 2008 financial crisis, your home value could drop. 

That could leave you upside down if you have a HELOC. Being upside down or underwater on your mortgage means you owe more than it's worth. 

Alternatives to consider if you’re unsure about a HELOC

A HELOC is just one way to borrow when you need cash. It may be worth your time to explore HELOC alternatives. 

Here are a few possibilities to consider.

• Home equity loan. A home equity loan is another way to borrow from your equity. With a home equity loan you get a lump sum instead of a line of credit. Even if you pay down your balance, you can’t borrow more without taking out a new loan.

• Personal loan. A personal loan is money you borrow for personal reasons. Personal loans aren't tied to your home, and they usually have fixed interest rates. The interest rates on personal loans tend to be higher than the rates on HELOCs, and the loan limits tend to be lower.

• Credit card. Credit cards could help you cover expenses in a pinch, though they typically have much higher interest rates than HELOCs. You could take a cash advance from a credit card, but that's one of the most expensive ways to borrow since interest rates often hover around 30%. 

• Retirement loans. If you have a 401(k) through your job, you may be able to borrow from it. That can be tricky, however, if you think a job change might be on the horizon. Typically, if you separate from your employer for any reason, you need to repay the entire loan in full. Otherwise, you could get hit with a sizable tax bill. 

• Friends and family. You might turn to friends and family if you need a smaller loan. Consider a formal loan agreement so that everyone involved is aware of the terms of the loan and when it will be repaid. 

What's next

• Calculate how much equity you have and how much of it you might be able to borrow with a HELOC. 

• Check your credit score. If it’s not where you want it to be, find out what you need to do to improve it. 

• Review your budget to see where a HELOC payment might fit into it.