Responsible HELOCs exist
By Julien Barbe
Reviewed by Kimberly Rotter
Apr 05, 2023 - Updated Mar 31, 2023
Read time: 5 min
Why an Achieve HELOC might be the right solution to consolidate high-interest debt
Let’s first define what a HELOC is.
A home equity line of credit, or HELOC, is a type of home equity loan where instead of receiving one lump sum that you repay in equal installments over a predetermined amount of time, the funds are available to you as you need them, up to your approved credit line. With some lenders, you might only have to make interest payments throughout the initial draw period (the 5 to 10-year period in which you can draw funds from your credit line), and then transition to paying both principal and interest once your draw period ends. HELOCs also typically have a variable rate (spoiler: ours offers a fixed rate).
The Achieve home equity loan is unique because it combines the best features of home equity loans and HELOCs. Our “hybrid” HELOC has a fixed rate with 10 or 15-year term options.1 With this solution, you can establish a revolving line of credit secured by your home. You can borrow money from it, pay it back, then borrow again at any time during the first 5 years of your loan term - your draw period. It’s also unique in that you start making payments towards your principal (the loan amount itself) and interest (the cost to borrow the money) from day one, so you don’t have to worry about your payments “ballooning” once your draw period ends. We find this helps borrowers more easily budget, since the repayment amount is more stable.
We know your home means a lot to you.
You’ve more than likely worked hard and made significant sacrifices to buy a home, and to build your equity (the value of your home minus what you owe) through making consistent monthly payments.
Owning a home is a hallmark of the American dream. It requires commitment, gives you a sense of security and stability, and often comes with enormous pride. With every mortgage payment, you get closer to truly owning your home, so it’s understandable that using your equity as a financial tool to solve other needs like managing high-interest debt may feel like a step in the wrong direction.
So why use your home equity to consolidate debt?
The Achieve home equity loan was built for debt consolidation. It helps homeowners use the equity in their home to improve their financial situation, benefiting from large monthly payment savings, guaranteed lower monthly payments, and lower rates than most alternatives.2
Many homeowners may not be eligible for a traditional home equity loan or HELOC due to less-than-perfect credit, the type of debt they have, or the amount of debt they owe. Our Mortgage Advisors look deeper and take the time to understand your needs and consider your financial goals to help you determine whether our loan is the right fit for you.
Here’s the quick list on why we feel our HELOC is a responsible solution to managing debt:
Typically lowers monthly payments
Large payment savings2
Quick, but thorough approval process
Predictable repayment plan
No prepayment penalty
And here’s what that means for you.
Lower monthly payments Because our product has better rates than high interest credit cards and a 10- or 15-year repayment period, you will typically benefit from lower monthly repayment amounts than if you were to keep making minimum payments on different high-interest debts. We’ll actually make sure it makes sense for you—we won’t make you a loan offer if we can’t save you at least $200/month.2
Large payment savings By consolidating other high-interest debts like credit cards or even payday loans under a single, more manageable payment, our members typically save nearly $10,000/year on average.2
Fixed rate Because you’re using your home as collateral, you may qualify for a much lower rate than most alternatives, and those rates are fixed for the life of the loan.
Quick, but thorough, approval process Typical timing from application to funding is around 2 weeks.3 In those 2 weeks, we’ll work with you to understand your goals, evaluate your financial history, and validate your ability to repay your loan.
Predictable repayment plan Unlike most home equity lenders whose variable rates can change month to month, our fixed rate is meant to help you more easily budget. Most HELOCs typically have you pay back only the interest throughout the early draw period and then change your repayment amount to include the principal once that draw period ends—which can be difficult to manage. We keep things consistent from day one.
No prepayment penalty You can fully repay your loan at any time with absolutely no prepayment penalty or fee.
To wrap things up.
We get that HELOCs can be confusing, and that using your house as collateral can be scary. That’s why we’ve taken the time to build something that works for you and are here to talk through any questions you may have.