HELOC or Home Equity Line of Credit is a variable-rate credit line and often their benefits are dependent, in part, on the rate environment. For instance, HELOC rate from the summer of 2000 until February 2001 skyrocketed to 9.50%. However, the rates dropped from 9.50% to 5.00% during 2001 and continued to fall till the rates reached 4% in July of 2003. Between July 2003 and March 2004 the prime rate hovered at 4%. However, if you had a HELOC from March 2004 to July 2006, then your rate would have doubled from 4% to 8.25% (Source: Federal Reserve Board). This week’s average HELOC rate is at 4.777% unchanged from last week’s average HELOC rate.

So, now you know how rates fluctuate – so what looked like a blessing a year back can be a burden today! However, that doesn’t mean HELOCs are bad. HELOC is undeniably a helpful tool as the interest is deductible and it can be used to retire more expensive debt like paying off a huge pile of credit card debt, or to finance college education for your kids. But HELOCs can be disastrous if used without judgment. Opening a HELOC is as easy as getting a credit card and the ease factor, surely, makes it very tempting. People open an account without knowing much about it and use the money to finance their day-to-day luxuries and let their balance grow and pay huge interest as they get into the HELOC hole.
All you need is to find a right HELOC. This is where HELOC calculators come handy as they: determine your current HELOC balance, help you get a clear picture of the borrowing and loan payments, also, help you prepare an effective and feasible budget so that you don’t end up being overburdened with debt. And the best part about HELOC calculators is that you don’t have to do the number-crunching! Just fill in the required boxes and know the number.