Is it safe to open a HELOC now?
Borrowing money always comes with inherent risk, but if it's unsecured debt, the risks can be more manageable and have less of an impact on your daily life. If it's a secured debt, in which you put up collateral like your home or vehicle, however, the risks can be more profound. Failure to repay what you borrowed can result in the loss of either item, the former of which can lead to your home being foreclosed on by the lender. So if you're borrowing home equity, you'll want to be smart in your approach and have calculated your costs in advance to avoid any surprises.
This is particularly important to do in the economic climate of early April 2025. With stock market performance dropping substantially, inflation still a sticky, albeit muted, concern and higher interest rates stuck at an elevated position, prospective home equity borrowers have a lot to juggle right now. Still, a home equity line of credit (HELOC) can be especially helpful now, thanks to elevated home equity levels and a consistently declining interest rate. HELOC rates this week fell below 8%, the lowest they've averaged since 2023.
Understanding the timely benefits of a HELOC, then, but with the broader economic concerns still prevalent, homeowners may be wondering if it's safe to open a HELOC now. Below, we'll break down why it can still be safe to open.
Start by seeing how low of a HELOC rate you'd be eligible for here.
Is it safe to open a HELOC now?
While every homeowner's financial situation (and credit score) differs, a HELOC can still be safe to open now. Here are four signs that it can be the secure move for you now:
You have a good credit score
If you have a good credit score, it indicates to borrowers that you're reliable and can make payments with relative ease on time. If you're this kind of borrower, then borrowing with a HELOC should be safe, even with today's economic turmoil. Plus, if you have a good credit score, you'll likely qualify for the lowest HELOC rates and most attractive terms, making repaying it easier than it would be if you were saddled with a high rate and tighter restrictions.
Get started with a HELOC online today.
You're only borrowing a small amount
A small amount borrowed is a small amount that will need to be repaid. So if you're only applying for a relatively small HELOC, you should be safe to proceed now. Remember, you'll only pay interest on the amount used, not the full line of credit approved for, so if you only use $10,000 out of a $50,000 HELOC, for example, you'll only have to pay interest on the latter amount. In other words: If you want to ensure security with a HELOC, consider borrowing a small amount and using even less than that.
You're using it for select home projects
Concern over a HELOC interest rate is understandable, as it's variable and can change monthly for borrowers. This is a distinct advantage when HELOC interest rates are on the decline, as they've been over the past few months, but can be problematic when rates rise. That said, if you're using your HELOC for select home projects and renovations, concern over the rate is less prevalent. That's because interest paid on HELOCs is tax-deductible if the line of credit is used for eligible home projects. So if you can deduct the interest paid on your next tax return, it could be a safer option than other products, like credit cards and personal loans, which won't qualify for the same tax benefit.
You've calculated a series of realistic repayments
Still, a variable rate will need to be accounted for when calculating your repayment costs. But if you calculate a series of realistic repayments – for example, tied to today's rates, what they were recently, and what they could be in the future – then you'll be in a more secure position. Just don't do the numbers on the assumption that rates will remain the same. If you're singularly focused on keeping the rate and the payment unchanged, however, a fixed-rate home equity loan may be worth researching as an alternative.
Learn more about borrowing with a home equity loan here.
The bottom line
Borrowing with a HELOC comes with inherent risks and rewards, as does any other borrowing product, regardless of the economic climate in which the financing is applied for. That said, if you have a good credit score, are only looking to borrow a small credit line, are planning to use the HELOC for select home projects and are willing to calculate a series of realistic repayment scenarios, a HELOC should be more than safe for you to open now – and to rely on for use over the common 10- or 15-year repayment period.
