 TITLE: How Does a HELOC Affect Your Credit Score? CONTENT: Pros and Cons of HELOCs\n-----------------------\nThere are a few key benefits to getting a HELOC:\n*   **Lower interest rates**: HELOCs generally have lower interest rates than credit cards and unsecured loan products because they are secured by your home. This means your home is used as collateral and protects the lender if you default on the loan.\n*   **Access to large amounts**: You may not have a lot of luck borrowing large amounts of cash if you apply for a credit card or personal loan. However, a HELOC gives you a better shot at getting approved if you have a large sum of equity in your home and meet the lenders' other qualification criteria.\n*   **Flexible**: You can draw as much as little as you need, up to the amount of available credit with a HELOC. This means you will only be responsible for interest on the funds you actually use. Installment loans don't give you this luxury: You have to pay interest on the total amount you borrow. For example, if you get a $80,000 HELOC and only use $20,000, you will only make payments on the $20,000 plus interest. But if you get a loan for $80,000, interest will be assessed on the entire amount.\nThere are some significant drawbacks to consider, however:\n*   **Lower equity in your home**: HELOCs reduce the amount of equity in your home. This could be problematic if your home value drops substantially and you decide to or need to sell it.\n*   **Higher payments**: Once your draw period ends, you'll begin making payments on the principal—which will be much higher than the interest-only payments you'd made up to that point. If you can't make the new monthly payments, you could lose your home.\n*   **Putting your home at risk**: If you're not sure you'll be able to make the payments on your loan—and thus hold on to your home—a HELOC is probably not a good choice. END