Home Equity Lines of Credit

HELOC Alternatives: Best Options For You

During the height of the housing bubble, home equity line of credit (HELOC) financing and home equity loans represented two of the most popular forms of credit. Homeowners, some of whom had paid very little toward their mortgages, nonetheless were able to borrow against the equity created by the inflated value of their homes. But as the housing market crashed, home equity loans and HELOCs diminished in popularity, although never disappearing completely. Nonetheless, HELOC alternatives and home equity loans exist for borrowers with fair to excellent credit. The lenders below, represent ten of the best options. Depending on your specific needs, one or more of these lenders may provide just the financing you need.

Best Home Equity Line of Credit Alternatives

If you want to use your home as security to qualify for low interest rates but you don’t want a home equity line of credit, consider home equity loans and shared equity agreements.

Home equity loans are very similar to HELOCs. The main difference is you get a lump sum instead of a line of credit. They typically have fixed interest rates and offer up to 85% of the equity in your home. If you’re interested in a HELOC but don’t want to deal with the slow process and eligibility requirements, consider Figure. This blockchain-based lending platform promises to simplify the home equity loan sector.

Shared equity agreements are, strictly speaking, not loans. Instead, they are investments in your home. How do they work? A finance company makes an equity investment in your property in return for a share of the home’s future appreciation. You don’t have to make monthly payments and you share some risk with the investor. In other words, the value of the investment rises and drops with the value of your home. Let’s say you borrow $100,000 and the value of your home drops by 10%. You would have to pay back less than you received from the investor. This is a relatively new sector but it is growing.

Currently, Unison provides the largest amounts and has competitive terms. Other options are Noah and Point.

But what happens if you don’t want to use your home as collateral. What alternatives are there to HELOCs that don’t include using your home as a security? The following lenders provide unsecured personal loans you may want to consider.

Alternatives for HELOCs when you have excellent credit

SoFi originally offered loan only to students and graduates who wanted to consolidate their debt but has since expanded its operations to provide loans to all borrowers, or at least those borrowers with excellent credit and high incomes. SoFi offers loans with repayment periods of 3 to 7 years, ranging from 5,000 dollars to 100,000 dollars.

LightStream offers flexible loan terms with low rates. Interest rates vary according to borrowers’ credit profiles and the purpose of the loan. The application process is conducted online and over the phone. Prospective borrowers receive a response within minutes of submitting their applications. Borrowers who complete the application process by 2:30 p.m. Eastern time on weekdays can receive their funds the very same day.

Alternatives for HELOCs when you have good to excellent credit

Many recent grads struggle with debt – not just student loans, but with credit card debt or with day-to-day bills. Upstart investigates applicants’ academic records and work records along with typical financial information in making lending decisions. Loan applications must be fully funded by donors before borrowers receive their money, a process that could require several days.

Alternatives for HELOCs when you have good credit

If your credit is decent but not excellent, ordinarily you would not qualify for the best interest rates for loans. But with Earnest, if you have a good education, high earning potential and have demonstrated responsible spending patterns and credit handling behavior, you could qualify for a 12-month loan with low interest rates. Earnest requires prospective borrowers to submit far more information than conventional loan applications, including access to LinkedIn profiles. Loan processing can also be slow, so Earnest isn’t the best choice to deal with financial emergencies.

Payoff is designed to allow people with at least 5,000 dollars in credit card debt to take loans to pay off their balances. Prospective borrowers must have credit scores in the mid-600 range, along with disposable income of at least 1,000 per month, a debt-to-income ratio of no more than 50% and no payments more than 90 days late during the previous 12 months.

Alternatives for HELOCs when you have fair credit

Prosper is a marketplace lending platform. Borrowers first pass a preliminary credit screening before being allowed to submit a full application. After the pre-screening process, prospective borrowers prepare detailed profiles that are posted on the Prosper website, where borrowers can choose to fund part, all or none of each particular request. Borrowers only receive their funds when they have collected enough donations to fully fund their requested loan amount – which can be a very lengthy process. 

LendingClub takes a different approach to marketplace lending. Instead of posting profiles online, prospective borrowers submit preliminary applications to generate a soft credit pull and produce one or more loan offers. After choosing an offer, borrowers submit more detailed applications. The online application process produces a response within minutes. Approved borrowers receive their funds within days. 

For active military personnel and veterans, along with eligible family members, USAA represents one of the best available lending options. Borrowers must have good or excellent credit to qualify for USAA loans.

Pentagon Federal Credit Union, commonly known as Pen Fed, is located in Alexandria, Virginia and is the third largest credit union in the United States, with more than 1.4 million members. The maximum repayment period for Pen Fed loans is 60 months. Borrowers must be members of the credit union to be eligible for loans.

Different personal loans come with different rates, fees and requirements, so check out what the best personal loans are to ensure that you choose the best option for you.