Do I pay interest on a HELOC if I don't use it?

Interest rates have been in the news for much of the last three years and for good reason. With a surge in inflation came a spike in the federal funds rate from the Federal Reserve. That caused interest rates on everything from mortgages to personal loans to credit cards and home equity borrowing products to rise in response. Mortgage rates, for instance, hit their highest level since 2000 and have only come down marginally since. Credit card interest rates, on the other hand, while not as closely tied to the Fed, hit a record high last fall. And while rates on home equity loans and HELOCs were not immune from this trend, they were less dramatically impacted. 

That's due, in part, to the home in question functioning as collateral. That allows lenders to offer lower rates than they would on other, unsecured borrowing products. This is why HELOC and home equity loan rates are well below 9% right now while credit cards and personal loans are in the double digits. A HELOC, in particular, has seen its average interest rate decline by more than two full percentage points over the past few months, and it could easily fall further should economic trends continue. Still, a 7.94% average HELOC rate isn't exactly cheap, either. So interest paid here will need to be closely accounted for to avoid foreclosure, particularly considering that HELOCs have variable rates subject to change monthly for borrowers.

But what happens when you secure a HELOC at a low rate, and don't use it? Do you still pay interest on the line of credit? That's what we'll analyze below.

See how low of a HELOC rate you'd be eligible for here.

Do I pay interest on a HELOC if I don't use it?

Before answering the question, borrowers should understand how a HELOC is different than a home equity loan. The latter is delivered via a lump sum of money, so interest will need to be repaid immediately until the loan is fully paid off. But a HELOC works as a revolving line of credit. If you're approved for a $20,000 HELOC, for example, but don't use it, you won't have to pay interest on it. 

That said, it won't be completely expense-free. There are typically closing costs involved in securing a HELOC and there may be annual fees and inactivity penalties, too, depending on the lender. So it's important to understand what these costs could be upfront, before securing the line of credit. You don't want to get stuck with out-of-pocket expenses for a HELOC that you're not using anyway. One of the better ways to determine what these extra costs could be (and one of the smarter ways to find a lower rate) is to shop around for lenders. You don't need to automatically use your current mortgage lender to secure a HELOC. So take the time to shop around and compare rates and terms from at least three different competitors to see which is most affordable.

Start shopping for HELOCs online today.

Why a HELOC makes sense now

In addition to the advantage of not having to pay interest on an idle HELOC (unlike a home equity loan), there are some timely advantages to using a HELOC now. Here are three to know:

• A lower interest rate: As of April 25, 2025, a HELOC has an average interest rate lower than a home equity loan, personal loan and credit card, making it one of the most affordable ways to borrow a large amount of money right now. And that rate could fall further in the weeks ahead.
• Tax benefits: Interest paid on the HELOC will become less of a concern if borrowers know they can deduct the interest from their next tax return. And that could be the case if you use the HELOC for eligible home repairs and projects this year. Just be sure you know which will qualify and which won't before getting started.
• Interest-only payments: If you eventually do decide to start using the HELOC, you'll be expected to make interest-only payments for the initial draw period, making this an even more affordable option right now. Just be sure to understand how long your draw period is and be cognizant of the changing rate climate, which could impact what you owe each month.

The bottom line

Homeowners won't pay interest on a HELOC if they don't use it. But closing costs, annual fees and (possibly) inactivity fees will still need to be accounted for. That said, a HELOC could be the smart and cost-effective way to borrow money in today's unpredictable rate climate. With concerns about rates on alternative products still pronounced, a HELOC remains one of the better alternatives for homeowners right now.