A HELOC can help finance considerable expenses such as home renovations, college education and medical bills, or be used to consolidate debt. Ultimately, how you'll use your home equity line of credit is up to you.
Before applying for a HELOC, it’s important to shop around and compare available lenders to find the best deal for your needs and situation. Currently, HELOC rates start from about 1% to 5%. Bank of America is MoneyGeek’s choice for the best overall HELOC lender in Alabama because of its low interest rates and discounts.
Home Equity Line of Credit (HELOC) Rates for 2023
When considering a HELOC, it’s crucial to compare lenders’ rates and terms to find the best option for you.
The table below shows an overview of home equity line of credit rates and pertinent lender information as of May 2022. Note that rates and other information may change in the following months, but they will be updated by MoneyGeek accordingly.
Lender | APR | Loan Amount | Min. Credit Score Requirement | Repayment Terms | Annual Fees | Pre-Approval Time |
|---|---|---|---|---|---|---|
3.75% to 18% | $25,000–$1,000,000 | 660 | 10-year draw period
| None | Not specified | |
Not specified | Not specified | Not specified | Not specified | Not specified | Not specified | |
1.99% special
| $25,000–$1,000,000 | Not specified | 10-year draw period,
| Not specified | Not specified | |
3.65% to 8.80% | $15,000–$750,000 | 730 | 10-year draw period,
| $90 | Not specified | |
Starting at 3.99% | $10,000–$500,000 | Not specified | 10-year draw period
| $75 | Not specified | |
Starting at 4.64% | $10,000–$500,000 | Not specified | 10-year draw period
| None | 24 hours | |
Starting at 3.50% | $15,000–$400,000 | 620 | Five to 30 years | 3% to 4.99% | 24 hours | |
Starting at Prime - 0.50% | Starting at $17,500 | Not specified | 10-year draw period,
| $50 | Not specified | |
Starting at 3.34% | Starting at $25,000 | 740 | Not specified | $50 | Not specified | |
3.49% for 6 months | Starting at $5,000 | Not specified | 15-year draw period
| None | 24 hours | |
3.75% to 10.63% variable | $10,000–$500,000 | Not specified | 10-year draw period,
| None | Not specified |
MoneyGeek’s Picks for Best HELOC Lenders in Alabama
MoneyGeek rounded up the best home equity line of credit lenders in Alabama to help you choose one perfect for your needs and situation.
Keep in mind that not many lenders offer HELOCs, and those that do are usually national banks offering exclusively to borrowers with good to excellent credit scores. MoneyGeek recommends checking with your local credit unions for alternative options if a national lender rejects your HELOC application.
Best Overall HELOC Lender in Alabama: Bank of America
- Bank of America
Best for borrowers who want additional rate discounts.
- 7.49% (introductory rate) then 9.90%APR Range
- UndisclosedMinimum Credit Score
- Generally $25,000 to $1,000,000Loan Amount Range
- 10-year draw period; 20-year repayment periodRepayment Terms
- NoneAnnual Fees
- UndisclosedPre-Approval Time
Best HELOC Lender for Good Credit in Alabama: U.S. Bank
- U.S. Bank
Borrowers with good to excellent credit can take advantage of fixed rates.
- 8.95% to 12.70%APR Range
- 660Minimum Credit Score
- $15,000 to $750,000 ($1 million in California)Loan Amount Range
- 10-year draw period; up to 30 years repayment periodsRepayment Terms
- Up to $75Annual Fees
- UndisclosedPre-Approval Time
Best HELOC Lender for Bad Credit in Alabama: Figure
- Figure
An excellent extended-payment option for borrowers with bad credit.
- 6.10% to 14.74%APR Range
- 640 (680 for investment properties or second homes)Minimum Credit Score
- $20,000 to $400,000Loan Amount Range
- 5 to 30 yearsRepayment Terms
- NoneAnnual Fees
- 24 hoursPre-Approval Time
Best HELOC Lender for Competitive Rates in Alabama: PenFed
- PenFed Credit Union
PenFed features the lowest APR on offer for qualified borrowers.
- Starting at 8.625%APR Range
- 680Minimum Credit Score
- $25,000 to $500,000Loan Amount Range
- 10-year draw period; 20-year repayment periodRepayment Terms
- $99Annual Fees
- UndisclosedPre-Approval Time
HELOC vs. Home Equity Loans
Home equity loans (HELOANs) and HELOCs are excellent ways to finance major expenses, using your home as collateral. When choosing between the two, knowing their differences is critical in determining the best option for your situation.
A home equity loan is a lump sum given to the borrower all at once. It usually has fixed rates for interest and monthly payments over the life of the loan. A HELOAN is ideal for borrowers who prefer predictability and want to avoid overspending.
However, a home equity line of credit is a revolving credit line similar to a credit card. You can withdraw money as often as needed within a designated time frame, up to a specified limit (like a credit card), and pay back the amount you borrow. HELOC rates usually are variable, meaning they can change based on economic trends. This option is best for borrowers who are good at budgeting their money and want more flexibility than a home equity loan offers.
HELOC | Home Equity Loan | |
|---|---|---|
Interest Rate | Adjustable interest rate,
| Fixed interest rate |
Monthly Payment | Changes depending on | Fixed monthly payments |
Repayment Terms | During the draw period, borrowers pay | Repayment starts as soon as
|
Fund Disbursements | Line of credit | Lump sum delivery |
How to Apply for a HELOC
It’s often easy to apply for a home equity line of credit. Most lenders allow online applications in which the applicant submits basic information and waits for approval. MoneyGeek outlines the recommended steps when applying for a HELOC below.
Determine how much you need
Before applying for a HELOC, you must know your desired credit line amount and how you’ll use it. A HELOC can be used for various financial purposes, including debt consolidation, home renovations and college expenses.
Assess your financial standing
Evaluate your financial situation to see if you meet the minimum requirements for borrowing. This includes checking your credit score, income and current loan-to-value ratio since these factors play a role in determining your rates. By reviewing your financial standing, you’ll also determine if you have the means to repay what you’ll owe.
Shop around and compare lenders
Comparing HELOC lenders is the only way to find the best option for your needs and situation. Review their offerings, rates and terms. Be sure to consider each lender’s annual fees, closing costs and rate discounts.
Apply
Most HELOC applications can be completed online, but some lenders require you to call or visit a brick-and-mortar location. The application process typically includes submitting information about your income and assets.
Use funds wisely
Once you start withdrawing, staying within your means is best to avoid falling further into debt. Remember that you could lose your house if you fail to keep up with the payments.
Frequently Asked Questions About HELOCs
Understanding how a home equity line of credit works can be challenging for first-time borrowers, so MoneyGeek provided answers to some frequently asked questions below.
sources
- Bank of America. "Home Equity." Accessed June 7, 2022.
- Bank of America. "Home Equity Assumptions." Accessed June 7, 2022.
- Bank of America. "Home Equity Line of Credit Application." Accessed June 7, 2022.
- U.S. Bank. "Home Equity Line of Credit (HELOC)." Accessed June 7, 2022.
- U.S. Bank. "Home Equity FAQs." Accessed June 7, 2022.
- Figure. "Homeowners, We're Here for You." Accessed June 13, 2022.
- Figure. "Figure Home Equity Line FAQs." Accessed June 13, 2022.
- PenFed. "PenFed Home Equity Line of Credit (HELOC)." Accessed June 7, 2022.
- Internal Revenue Service. "Publication 936 (2021), Home Mortgage Interest Deduction." Accessed June 7, 2022.