The average American homeowner has nearly $200,000 in tappable home equity. That money can come in handy when you need to make home repairs, pay off high-interest debt or pay for expensive medical costs.

One of the best ways to tap into your home equity is to get a home equity line of credit (HELOC). These lending products give you the ability to access your equity during a draw period that typically lasts anywhere from five to 15 years. Moreover, these loans usually come with competitive interest rates. 

So, is a HELOC the best way for you to tap into your home equity? What are some of the biggest pros and cons of HELOCs in 2024? Keep reading to find out. 

Learn more about your HELOC options now. 

Pros and cons of HELOCs in 2024

It's important to consider the pros and cons before you take advantage of any financial product or service. That's especially true when it comes to HELOCs. After all, these loans are tied to your home. So, it's important to understand how they work before you agree to take one out. Here are the pros and cons you should consider in today's market.  

Pro: HELOCs have variable interest rate

HELOCs typically come with variable interest rates, which can be a good or a bad thing depending on the state of the market. In today's market, that's arguably a good thing. 

Interest rates are cyclical - meaning they rise and fall. At the moment, we're experiencing a high interest cycle. However, all signs point to reduced interest rates ahead. Because HELOCs usually have variable interest rates, you'll likely benefit in the months to come if rates do fall as expected. 

Get a HELOC today and take advantage of potential rate declines ahead. 

Con: Variable payments can make budgeting difficult

Sure variable rates give you an opportunity to benefit from future rate reductions, but variables can also cause budgeting headaches. When you take out a loan with a fixed loan amount and interest rate - like your typical home equity loan - you know exactly how much your monthly payments will be. 

Because of the variable nature of HELOCs, both in terms of their balances during draw periods and their interest rates, it's difficult to determine what your payment might be during your payoff period.

Pro: HELOCs give you flexible access to funds 

HELOCs are a strong option, "especially when it comes to flexibility," explains Darren Tooley, senior loan officer at Cornerstone Financial Services in Southfield Michigan. "They're a great option for those who may want access to a safety net amount of cash but without a specific need now, or for those who will need access to cash over time but without knowing exactly when or how much is needed."

With a HELOC, you can take out as much money as you need, up to your approved credit limit, during the draw period. You can even borrow funds, pay them off, and borrow them again as many times as you'd like during your draw period. That flexibility may be a welcome factor as you work to achieve your goals in 2024. 

Con: Your home is the loan's collateral

You should never take out a HELOC you can't afford to pay back. That's because you secure the loan with the equity in your home. That means if you're unable to make the loan payments as agreed, you could lose your home. In today's improving but still unpredictable economy this is a major concern to account for.

Pro: HELOCs typically have a lower starting interest rate than home equity loans

When compared to home equity loans, HELOCs typically have a lower starting interest rate. That's important considering the fact that the amount you borrow is likely going to be for a substantial amount of money. So, even a small difference in interest could be worth thousands of dollars over the life of your debt. Considering the current interest rate environment, this could be a significant plus.  

Save on interest with a HELOC now. 

The bottom line

HELOCs, like any other financial product, come with their own set of pros and cons. It's important to consider those pros and cons before you decide to open one of these credit lines. Nonetheless, if you have home repairs, high interest debts or other large expenses you need to take care of at a competitive interest rate, a HELOC may be the solution you're looking for, particularly this year.