In recent years, both home equity loans and HELOCs have gained traction, and their popularity is expected to rise in 2025 and beyond. As more people learn about their benefits, we have seen more people tap their homes for cash to fund their major life expenses. The primary reason behind their popularity is that they offer lower interest rates compared to other financing options, such as traditional bank loans. Where mortgage rates and different interest rates are still high, home equity loans have been decreasing. The significant difference in interest rates has made people turn to HELOCs.
In this article, we will explain why HELOCs have become quite popular among people looking for a reliable, low-interest, and safe financing option. So, let’s dive in to learn more.
What are a Home Equity Loan and a Home Equity Line of Credit?
If you are wondering about home equity loans and HELOCs, let’s start by understanding the difference. Although both methods allow the homeowner to borrow money by keeping their house as collateral, their structure and repayment terms differ. A home equity loan is a one-time amount with a fixed repayment schedule and a variable interest rate. It is best for people who are looking for a specific, one-time amount that can be used for home renovation, significant life events, and medical bills.
On the other hand, a home equity line of credit (HELOC) offered by companies like Amerisave is a revolving money circle that you can draw from according to your needs. This line of credit is ideal for people who want to access money throughout the year. Out of both options, a HELOC is the more popular choice, as it is more convenient and flexible.
Reasons Behind the Rising Popularity of Home Equity Loans & HELOCs
There is no denying that home equity loans and HELOCs have created a buzz as they offer low interest rates with an adjustable repayment method. In fact, compared to other financing options such as credit bills, business loans, and personal loans, the rates of home equity lines of credit are relatively lower. Let’s explore some of the significant reasons why people are choosing these loans in 2025:
Flexible Borrowing
A home equity loan and HELOC can be borrowed as needed. This borrowing flexibility helps you manage your cash flow and maintain business stability. An additional benefit of HELOCs is that they frequently have variable interest rates, meaning that rates are subject to change in response to market conditions. Furthermore, these loans allow you to pay for home upgrades, unanticipated expenses, and tuition and educational expenses.
Tax Benefits
Among various other reasons to use a HELOC, one that stands out is that if you use the borrowed money on home upgrades, your interest money might be deductible. This suggests that you can write off the interest paid on your tax return if you use your HELOC to construct an addition, remodel your kitchen, or install energy-efficient systems, which would lessen your overall financial burden.
Flexible Repayment Schedule
Many people are drawn towards borrowing home equity loans as they offer a flexible payment schedule. This makes it easy for you to return the payment. HELOC typically offers a draw period of 5-10 years, during which you can borrow as much money as you need. Additionally, it provides a repayment time of at least 10-20 years.
A home equity line of credit can be a powerful financial tool for achieving financial freedom. Lastly, because of their highly flexible borrowing and lower initial interest rates, HELOCs are expected to become even more popular in the coming years.
Read more: 4 Ways Augmented Reality is Transforming Various Industries
