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HELOC vs. Credit Card: What's Better For Personal Use?


Dec 23, 2022



Table of Contents

#1. Unsecured Borrowing Versus Secured Borrowing
#2. Credit Cards or Home Equity Line of Credit for Personal Spending
#3. 2 Key benefits of a HELOC
#4. Meet hitch

When it comes to personal spending, most of us rely on forms of borrowing rather than using cash for every purchase. Funding your purchases with borrowed funds can be a great way to grow your savings, budget your spending, and hold on to more of your cash. But, it’s extremely important to strategize the way you navigate your consumer borrowing products to help you build up a strong financial foundation. To learn some facts and how to do that, keep reading!

  • Today, there are more than 365 million open credit cards nationwide

  • The average American has more than three credit cards.

  • LendingTree, Americans’ total credit card balance is $986 billion in the fourth quarter of 2022

Let’s look at why unsecured forms of borrowing, like credit cards, aren’t as strategic as secured borrowing tools — specifically a home equity line of credit for eligible homeowners.

#1. Unsecured Borrowing Versus Secured Borrowing

The Drawbacks of Unsecured Borrowing

In recent years, we’ve seen unsecured borrowing proliferate. Unsecured borrowing tools like credit cards introduce notably high interest rates that most people have simply gotten used to as the normal solution for funding personal spending.

Besides charging high interest and fees, credit cards also lack transparency. When you use a credit card and you have a balance that rolls over to the next month, it’s not always obvious that your credit card provider is charging somewhere around 20% on that balance.

If you do not have any assets to borrow against, these lackluster credit card terms and conditions may seem like a necessary expense to access benefits as a borrower.

The Benefits of Secured Borrowing

If you do own an asset that you can borrow against — which is the case for homeowners — it does not make sense to deal with the costly drawbacks of unsecured credit cards.

Instead, homeowners with ample equity should leverage a home equity line of credit to reduce the expenses associated with borrowing for their personal expenses.

A home equity line of credit is a secured borrowing solution that uses your home as collateral to help you boost your borrowing eligibility. By seeking a home equity line of credit, you can access a reduced interest rate by leveraging the property asset you already own.

#2. Credit Cards or Home Equity Line of Credit for Personal Spending?

pxfuel.com.jpg Being a secure form of borrowing and low interest rate alternative to commonplace credit cards, a home equity line of credit is the superior solution for consumer borrowing.

With a HELOC, you can get more out of your money since you will not be paying incredibly high interest on what you spend.

While it is true that many homeowners pursue HELOCs for very specific, high-expense needs — like tuition, wedding costs, or sourcing investment capital — HELOCs can also be used for personal spending.

You can use a HELOC to cover your personal expenses just like you would use your credit card, except without the catch of high interest charges.

If you’re tired of credit card balances that don’t seem to budge because of the extreme interest rates being applied every month, a HELOC can help you rewrite your financial story by putting your home equity to work for you.

#3. 2 Key Benefits of a HELOC

A home equity line of credit introduces many benefits, but two of the most important perks are the large credit lines and low interest.

Since a HELOC is secured by your home, homeowners often get approved for larger credit lines than they may have with an unsecured form of borrowing like a credit card. If you get a HELOC with Hitch, you may be able to borrow up to 90% of your home’s value minus your current mortgage balance.

This gives you more financial power and provides you with greater monetary bandwidth for your personal expenses.

Hitch HELOCs also offer competitively low interest rates, meaning you can pay less for what you spend — all while accessing a larger credit line.

#4. Meet Hitch: The Best Home Equity Loans in the U.S.

Are you ready to rethink how you’re using consumer financing tools to fund your personal expenses? A HELOC can help you save money over time on the high interest being charged by credit card companies.

To streamline the process of getting a HELOC, Hitch offers a secured fully digital process — from submitting your application to receiving your funds. Low upfront fees, fast access to cash, and your own dedicated loan officer are other benefits Hitch offers homeowners.

If you’re curious to know how much you could save by using a HELOC, we have a helpful estimation tool just for you! Check how money your homes equity is worth here! See just how much money a home equity line of credit can save you over time.

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Equal Housing Lender

Hitch, Inc. NMLS #2383367 #2383367

2158 NW Toussaint Drive. Bend, Oregon 97703

1. Qualified applicants may borrow up to 95% of their home’s value. This does not apply to investment properties.

2. HELOCs have a 10-year draw period. During the draw period, the borrower is required to make monthly minimum payments, which will equal the greater of (a) $100; or (b) the total of all accrued finance charges and other charges for the monthly billing cycle. During the draw period, the monthly minimum payments may not reduce the outstanding principal balance. During the repayment period, the borrower is required to make monthly minimum payments, which will equal the greater of (a) $100; or (b) 1/240th of the outstanding balance at the end of the draw period, plus all accrued finance charges and other fees, charges, and costs.The lender will calculate this amount by taking the outstanding Account Balance on the last day of the draw period and dividing it by 240 months and then adding any finance charge that accrues but remains unpaid during the monthly billing cycle plus any other fees, charges and costs to the fixed principal payment that is due. During the repayment period, the monthly minimum payments may not, to the extent permitted by law, fully repay the principal balance outstanding on the HELOC. At the end of the repayment period, the borrower must pay any remaining outstanding balance in one full payment.

3. The time it takes to get cash is measured from the time the Lending Partner receives all documents requested from the applicant and assumes the applicant’s stated income, property and title information provided in the loan application matches the requested documents and any supporting information. Most borrowers get their cash on average in 21 days. The time period calculation to get cash is based on the first 4 months of 2024 loan funding's, assumes the funds are wired, excludes weekends, and excludes the government-mandated disclosure waiting period. The amount of time it takes to get cash will vary depending on the applicant’s respective financial circumstances and the Lending Partner’s current volume of applications. Closing costs can vary from 3.0 - 5.0%. An appraisal may be required to be completed on the property in some instances.

4. Not all borrowers will meet the requirements necessary to qualify. Rates and terms are subject to change based on market conditions and borrower eligibility. This offer is subject to verification of borrower qualifications, property evaluations, income verification and credit approval. This is not a commitment to lend.

5. The content provided is presented for information purposes only. This is not a commitment to lend or extend credit. Information and/or dates are subject to change without notice. All loans are subject to credit approval. Other restrictions may apply.