Getting a Great Home Equity Loan Rate

A home equity line of credit (HELOC) allows you to borrow a percentage of your home's equity value and receive the funds in increments. The key to success with a HELOC is to secure a competitive rate, and shopping around ahead of time is essential.

A home equity line of credit (HELOC) is essentially a personal credit line based on your home's equity. It can be used like a typical credit card or checking account. When you need money, you withdraw from it for home improvements, and you're charged interest based on how much you borrow, and how long you take to repay it. Each HELOC operates according to the specific terms and rules of your lender. But one thing is true across the board: The lower the interest rate, the better it is for you, the consumer.

Tips for the great rate search

Here are some suggestions to help you get a great rate on a HELOC home improvement loan:

• Shop around: Just like with credit card companies, there's competition between HELOC lenders, so shop around for the best deal. Check the introductory rate, as well as the longer-term rates, to predict how much you'll be charged over time. Ask about any miscellaneous fees or special charges.

• Don't max out: Your lender may offer a high credit limit, but you don't have to take the whole bait. Borrow what you need, when you need it, and pay off your balance as soon as you can.

• Pay in a timely manner: Once you enter into a HELOC arrangement, don't make any late payments or you'll incur steep penalties and damage to your credit report. It may even trigger higher interest rates.

• Raise your credit score: Any lender will offer VIP treatment to those with stellar credit, so focus on keeping your credit reports updated and free from blemishes. When you need to borrow, you'll have a better chance at getting preferential perks, such as lower rates.

Using a HELOC offers the convenience you're accustomed to with a credit or debit card or checking account. But it lets you tap into the equity in your property without having to dip into your bank account. Use your HELOC responsibly and it can be a great financial tool and a handy vehicle for enhancing your personal credit. A man's home may be a castle; it's a ticket to other riches, as well.