The convenience of credit cards has permeated our culture so much that it has created a demand for a HELOC credit card. This might be a slippery slope for consumers as they tap into home equity the same way they use a credit limit, putting their homes on the line as collateral.
How do HELOC credit cards impact long-term financial planning? How does this compare to traditional HELOCs?
We’re debunking misconceptions to help you and your customers compare HELOC credit cards to traditional HELOCs.
Start offering your borrowers a convenient and affordable HELOC now.
Myth 1: HELOC credit cards offer more flexibility than HELOCs
HELOC credit cards, traditional HELOCs, and credit cards all relate in that they allow for a revolving line of credit that provides some degree of flexibility.
Traditional HELOC features from a lender like Figure include lower interest rates and fixed interest that offer lower, predictable monthly payments. This structure sets customers up to responsibly use their money in flexible ways, such as:
Accessing cash to pay for large, intentional purchases
Freeing themselves from high-interest debt
Financing life-changing goals by leveraging their property as an asset
In comparison, although a HELOC credit card might seem convenient it comes with possible risks and downsides, including:
Variable interest rates up to 15%+ that impact monthly payment amounts
Fees to transfer funds from card to bank account to access cash for large transactions (necessary for purchases that don’t accept credit cards or charge a large processing fee)
Potential tendency to overspend using a card
Possibility of annual fees and terms that might make use and repayment less straightforward than a traditional HELOC
Learn more: How to sell HELOCs to a nation addicted to credit cards
Myth 2: Using a HELOC credit card is more convenient than making HELOC draws
HELOC draws don’t have to be complicated. With the right help and the right HELOC, draws are a simple way for customers to access cash and leverage their home equity responsibly.
The convenience of credit cards leads to the risk of overspending, as people are 18% more likely to overspend with a physical credit card.
Cash drawn from a traditional HELOC can be used for a broader range of intentional purchases and expenses than HELOC credit cards, especially larger purchases.
For example, drawing cash from a HELOC is an affordable and efficient way to pay a contractor for work like home renovations, solar installation, ADU builds, etc. Homeowners need cash for the agreed-upon payment schedule for the work they’ve requested.
In some cases, a contractor will accept a HELOC credit card, but credit cards may have a hefty processing fee charged to the homeowner.
Download our in-depth lender playbook to learn more. We’ll show you how to connect with contractors to turn their prospects into your new HELOC customers.
Myth 3: HELOC credit cards and HELOCs have the same level of risk
This is true in some ways because the customer uses their home as collateral in either case.
However, traditional HELOCs continue to be the more responsible option for tapping into property as an asset. Using traditional terms lowers risks to lenders and makes HELOCs affordable to customers in the short and long term.
Of course, in either case, if the customer can’t pay back what they borrow, they risk losing the property used as collateral. Customers need to clearly understand this as they choose their financing option.
Serve your customers with the latest HELOC tools
Traditional HELOCs are easier than ever to close, providing homeowners with access to cash quickly. Figure is revolutionizing the HELOC space with a 100% online HELOC application. The process is streamlined for lenders as consumers do the following:
Get a personalized fixed rate1navigates to numbered disclaimer with term options in as little as 5 minutes
Upload ID and connect accounts to automatically confirm identity, assets, and income
Use online notary service* in available locations for convenient closings
Borrow between $15,000 to $400,0003navigates to numbered disclaimer and redraw up to 100% of the original loan limit
*eNotary is not available in all locations
Now featuring Intellidebt and AI Technology
Figure’s latest addition, Intellidebt, empowers consumers to consolidate debt into a lower monthly payment while potentially qualifying for a higher loan amount. With Intellidebt, you can preview your customers' existing debts right from our application, allowing you to tailor solutions to their unique needs and convert leads into loyal clients.
We’ve also integrated advanced AI technology to streamline our Loan Origination System, eliminating over $8 million in unnecessary costs.
Gain insight into the current homeownership landscape. Read our State of Home Equity Report, highlighting key macro trends in the market.
Set your business and your customers up for success
We’d love to partner with you to offer customers responsible financing options beyond the obvious credit card or new HELOC credit cards.
Leverage one of the fastest HELOCs available with our 100% online, streamlined application.
