What's a HELOC?
A Home Equity Line of Credit (HELOC) is a line of credit you can access for a variety of things: debt consolidation, home improvements, major purchases (appliances, cars, RVs, boats, etc.), and many other expenses.
It works much like a credit card. But, because it’s secured by your house, you may be able to access more money at lower interest rates than with a credit card or personal loan.
HELOCs give you flexibility in your monthly payments. You can even make interest-only payments during the draw period (up to the first 10 years of your HELOC).³
How is a HELOC through Prosper different?
HELOCs typically involve a time-consuming application and verification process—including a hard credit pull that impacts your credit score just to see your offer.
We’ve streamlined and securely digitized that process, empowering you to get a HELOC in only a few weeks! Better yet, you can see your instant, personalized offer without affecting your credit score.
What about variable rates?
A HELOC through Prosper has a variable rate, meaning the interest you pay could increase or decrease. Changes to this rate are calculated by adding the margin identified in your credit agreement to the current prime rate (ie https://www.wsj.com/market-data/bonds
During the draw period, you can make interest-only monthly payments with a minimum payment of $75. Paying more than the interest you owe will enable you to borrow additional money during the draw period. If you prefer a fixed rate option, during your draw period you can choose to “lock in” your rate up to three times.**
During the repayment period you'll pay down what you owe by making a monthly payment calculated using the interest rate in effect at the start of your repayment period. When rates decrease, less interest is due, so more of your monthly payment repays the principal balance. When rates increase, more interest is due, so less of your monthly payment repays the principal balance. In this case, you may need need make a single “balloon” payment to cover your unpaid balance in full at the end of your repayment period. For Texas HELOCS different rules apply: if the interest rate increases during your repayment period, then your monthly payment will also increase in order to repay your balance by the end of the repayment period.
How can I use my HELOC?
You can use your HELOC for a variety of things including home improvements, debt consolidation², major purchases (appliances, cars, RVs, boats, etc.), and even miscellaneous expenses.
Is a HELOC secured or unsecured?
A HELOC is secured by your house. This means your home acts as collateral for your line of credit in case you are unable to make your monthly payments (similar to how your house is collateral for a mortgage).
Because your line of credit is secured, the APR you receive may be lower than unsecured loans or credit cards.
How is my equity calculated?
Home equity is calculated by subtracting the amount of money you still owe on your house from the total value of your home. For example, if your home is valued at $300,000 and you owe $200,000 on your mortgage, your current equity is $100,000.
Most lenders will require you to have 10-20% of your home value remaining after you get your HELOC. So, in this example (depending on your creditworthiness and debt-to-income ratio) you could qualify for a HELOC of $40,000 with 20% of your home value remaining.
$100,000 (current equity) - $40,000 (HELOC amount) = $60,000 (20% of property value)
How is my max line calculated?
Your estimated maximum line amount is based on the amount of equity you have in your home, your creditworthiness, your debt-to-income ratio, and other factors.