ARKANSAS HELOC RATES TODAY
Current HELOC rates in
Arkansas.
Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Current HELOC rates in
Turn your home equity into cash. Call us for a complimentary consultation or get prequalified online.
Compare HELOC rates in Arkansas.
Key Points
• To secure the best HELOC rates in Arkansas, take the time to build your credit score, assess your home equity and debt-to-income ratio, and compare multiple lenders.
• HELOCs offer lower interest rates than personal loans or credit cards because your home serves as collateral.
• HELOC rates in Arkansas are influenced by borrower metrics such as home equity position, credit score, income, and combined loan-to-value ratio.
• Understanding Arkansas HELOC rates is crucial for homeowners looking to leverage their home equity for various needs.
Introduction to HELOC Rates
For homeowners who have been making regular home loan payments over the years, leveraging their accumulated equity can be a relatively cheap source of cash. But with so many financing options out there, how do you choose the best one for your financial situation and goals? And how do you know you’re getting the best available interest rate?
This article provides an overview of Arkansas HELOC interest rates. Readers will learn about the HELOC application process, the benefits of HELOCs, and other ways to borrow against your home. By the end, you’ll understand the factors influencing these interest rates and how to secure a competitive deal that fits your long-term needs.
First we’ll get into what is a what is a home equity line of credit.
What Is a HELOC?
A HELOC is a revolving credit line that allows the homeowner to borrow up to 90% of your home’s value, minus what you owe on your mortgage. Because a HELOC works somewhat like a credit card, you don’t have to borrow the entire amount at once. You can borrow in increments as you need the money. And because the HELOC is secured by your home, it usually has a lower interest rate than a credit card or personal loan.
A HELOC has two phases: draw and repayment.
The Draw Period
During the HELOC’s draw period (usually 10 years), you can access funds up to your credit limit, make payments to reduce your balance, and borrow again. Interest-only payments are typically required during this period, but principal payments may be optional.
The Repayment Period
During the repayment period (typically 10 to 20 years), borrowing ends, and you pay back the principal with interest (but only on the amount borrowed, not the full credit line). HELOCs have variable interest rates that fluctuate over the loan term, making repayment unpredictable. A HELOC repayment calculator can help you understand the impact of interest rate changes on your payments.
Where Do HELOC Interest Rates Come From?
HELOC interest rates are tied to the prime rate and influenced by economic and housing market factors. The prime rate is the benchmark interest rate for a bank’s most creditworthy customers. Federal Reserve policy decisions also impact HELOC rates.
Understanding these factors can help borrowers anticipate rate fluctuations and make informed decisions about the best time for a HELOC.
How Interest Rates Impact HELOC Affordability
Interest rates significantly impact the affordability of HELOCs over a 10-year draw and 20-year repayment period. A mere 1% difference in interest rate can result in thousands of dollars in additional interest over the duration of the loan. This example, for a $50,000 HELOC repaid over 20 years, shows the monthly payment and total interest paid at three different interest rates:
• At 6.00%: monthly payment $358, total interest paid $35,972
• At 7.00%: monthly payment $388, total interest paid $43,036
• At 8.00%: monthly payment $418, total interest paid $50,373
HELOC Interest Rate Trends
HELOC rates follow the prime interest rate trends. Since 2018, the prime rate has ranged from a low of 3.25% in 2020 to a high of 8.50% in 2023. The chart shows prime rate fluctuations over the last 50 years. Understanding these trends can help you predict where HELOC rates are headed.
Historical Prime Interest Rate
| Date | U.S. Rate |
|---|---|
| 9/19/2024 | 8.00% |
| 7/27/2023 | 8.50% |
| 5/4/2023 | 8.25% |
| 3/23/2023 | 8.00% |
| 2/2/2023 | 7.75% |
| 12/15/2022 | 7.50% |
| 11/3/2022 | 7.00% |
| 9/22/2022 | 6.25% |
| 7/28/2022 | 5.50% |
| 6/16/2022 | 4.75% |
| 5/5/2022 | 4.00% |
| 3/17/2022 | 3.50% |
| 3/16/2020 | 3.25% |
| 3/4/2020 | 4.25% |
| 10/31/2019 | 4.75% |
| 9/19/2019 | 5.00% |
| 8/1/2019 | 5.25% |
| 12/20/2018 | 5.5% |
| 9/27/2018 | 5.25% |
Source: U.S. Federal Reserve
Historical U.S. Prime Rates
Factors Influencing HELOC Rates
HELOC rates are also influenced by the borrower’s financial profile.
Home Equity
Possessing substantial home equity places you in a lower risk category for lenders, thereby securing you more favorable interest rates. Customarily, homeowners are required to have a minimum of 15% equity to qualify for a HELOC. Employing a home equity loan calculator can give you an estimate of your equity and potential borrowing capacity.
Credit Score
You need to maintain a credit score of 680 or higher when seeking a HELOC in Arkansas, and many lenders prefer it to be 700+. Building your credit score can increase your chances of securing more beneficial terms.
Stable Income
A steady income serves as a reliable indicator of a lower likelihood of default. That means consistent employment in the same job over the years can be just as important as how much you make.
Loan-to-Value Ratio
Most lenders require your combined loan-to-value ratio (your mortgage balance + desired HELOC, divided by your appraised home value) to be 90% or less, although some will allow you to borrow 100% of your home’s value. The ratio is a key metric in determining your credit limit. If your home value is $500,000, your mortgage balance is $300,000, and your HELOC balance is $100,000, then your LTV ratio is 80%.
Recommended: HLEOC Interest-Only Calculator
Variable vs Fixed Interest Rates
HELOCs feature variable interest rates, which are subject to change over the course of the loan term. These rates may start lower compared to typical fixed rates but then change — going either up or down — with market conditions.
Tools & Calculators
Online calculators can be valuable tools to have at your disposal when deciding between a HELOC vs a home equity loan. You can utilize our calculators to plan your budget, estimate your interest-only payment during the draw period, and your larger monthly payment when borrowing is over.
Run the numbers on your HELOC.
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Home Equity Loan Calculator
Enter a few details about your home loan and we’ll provide you your maximum home equity loan amount.
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HELOC Payment Calculator
Punch in your HELOC amount and we’ll estimate your monthly payment amount for your HELOC.
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HELOC Interest Only Calculator
Use SoFI’s HELOC interest calculator to estimate how much monthly interest you’ll pay .
Using the free calculators is for informational purposes only, does not constitute an offer to receive a loan, and will not solicit a loan offer. Any payments shown depend on the accuracy of the information provided.
How to Qualify for a Competitive HELOC Rate
To secure the most favorable Arkansas HELOC rates, there are steps you can take. First, work to cultivate your credit score over time, evaluate the state of your home equity, and precisely calculate your debt-to-income ratio.
Take Care to Your Credit Score
Consistently pay your bills on time, and diligently pay down your credit card balances, and your credit score will benefit. Review your credit reports on a regular basis as well, and dispute any errors you find.
Assess Your Home Equity
Regular mortgage payments help in building home equity over time. Home equity can be enhanced through renovations that boost the property’s value. Increased home equity can lead to better terms and higher amounts when applying for a HELOC.
Calculate Your Debt-to-Income Ratio (DTI)
Your debt-to-income ratio (DTI) is calculated by dividing your total monthly debt payments by your monthly income. Generally, home equity lenders prefer a DTI below 36%, but the lower your DTI, the more favorable it is.
Application Process for a HELOC in Arkansas
The HELOC loan application process in Arkansas consists of multiple essential steps. Here they are in detail.
Run the Numbers
Check your credit scores, calculate your DTI, and get a good estimate of your home equity before you apply for a HELOC. Some lenders allow borrowers to prequalify for a HELOC online, streamlining the application process.
Compare Lenders
See what interest rates you qualify for in Arkansas, but also compare lenders’ qualification requirements, loan minimums and maximums, fees, the length of the draw and repayment periods they’re offering, and other factors.
Gather Your Documents
Before applying for HELOC loans, it is imperative to gather and organize all the necessary documents. These typically include proof of income (W2s, pay stubs), employment history (a resume), credit reports, and documentation of your home’s value. Having these documents readily available will not only streamline the application process but also ensure a smoother and more efficient experience.
Submit Your Application
Submitting your HELOC application takes place online, by phone, or in person. Make sure to complete all fields; leaving anything blank or failing to attach documentation can slow or stall the process.
Get an Appraisal
If your home appraises for more than your mortgage balance, the lender may approve you for a HELOC. The appraisal helps determine the amount of equity you have in your home, which affects the loan amount you can qualify for.
Prepare for Closing
Before accessing your HELOC funds, you must sign loan documents and pay necessary fees. Certain lenders conveniently make funds available within a mere three business days following the closing of the HELOC loans.
Tax Benefits and Considerations
Homeowners can deduct HELOC interest if the borrowed funds are used for buying, building, or significantly improving their primary residence. Interest deductions are limited to the first $375,000 of the mortgage principal for individual taxpayers ($750,000 for married couples filing jointly). Consulting a tax advisor can help borrowers navigate the specific tax implications and confirm your eligibility for deductions.
Closing Costs and Fees
HELOC closing costs are usually lower than home buying or cash-out refinance costs. The appraisal fee, typically the highest expense, ranges from $150 to $500. Other costs may include application, loan origination, and administrative fees. Some lenders charge annual maintenance fees, transaction fees for withdrawals, inactivity fees, or early termination fees. Many lenders waive closing costs but may charge a higher interest rate.
Alternatives to HELOCs
There are different types of home equity loans in addition to home equity lines of credit (HELOCs), other financing options include home equity loans, cash-out refinancing, and personal loans. Carefully consider the pros and cons of each option, including HELOCs versus home equity loans and cash-out refinancing versus home equity lines of credit, to determine the best fit for your specific financial needs and circumstances.
Home Equity Loan
Now we come to what is a home equity loan. Unlike home equity lines of credit, home equity loans provide a lump sum amount and are repaid at a fixed interest rate. Homeowners can typically borrow up to 85% of the equity built in their homes through a home equity loan. The chart below breaks down the differences between these two popular options.
| HELOC | Home Equity Loan | |
|---|---|---|
| Type | Revolving line of credit | Installment loan |
| Interest Rate | Usually variable-rate | Usually fixed-rate |
| Repayment | Repay only what you borrow; you may have the option to make interest-only payments during the draw period. | Starts immediately at a set monthly payment. |
| Disbursement | Charge only the amount you need. | Lump sum. |
Cash-Out Refinance
This type of mortgage refinance allows homeowners to pay off their current mortgage for more than they owe and take the difference in cash. A cash-out refi will leave you with one monthly payment (a new mortgage) rather than the two you would have if you carry a mortgage plus a HELOC or home equity loan. However, if you have a rock-bottom interest rate on your current mortgage, a refi might not make sense at this time.
Personal Loan
An unsecured personal loan is repaid in regular monthly payments over a term of two to seven years. Personal loans do not require collateral, making them a good alternative for individuals who lack home equity. However, interest rates are typically higher than those for HELOCs and home equity loans.
Recommended: Cash-Out Refinance vs Home Equity Line of Credit
Credit Cards
Credit cards typically come with higher interest rates than HELOCs, which can make them considerably more expensive if you carry a substantial balance over an extended period of time. While credit cards offer convenience and flexibility for smaller purchases, they often don’t make sense for larger expenses such as home improvements or debt consolidation.
The Takeaway
Understanding HELOCs and their alternatives can be a complex endeavor. In a nutshell, HELOCs offer competitive interest rates and flexible repayment for a host of big-ticket items. If you’ve cultivated a good credit score, have a low DTI ratio, and substantial home equity, a HELOC is worth considering. Just make sure to shop around with multiple lenders to find the best available rates and terms before making a decision.
SoFi now offers flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively low rates. And the application process is quick and convenient.
FAQ
What’s the monthly payment on a $50,000 HELOC?
The monthly payment for a $50,000 HELOC, which is a type of revolving credit that uses the equity in your home as collateral, is determined by the interest rate and repayment terms. Employing a HELOC monthly payment calculator can be helpful in approximating the payments. For instance, with a 7.25% interest rate and a 10-year repayment period, the monthly payment would amount to approximately $587.
Is a HELOC a good idea right now?
Deciding whether a HELOC is a good choice is contingent upon your financial situation. While HELOC loans can make paying for home improvements or debt consolidation a bit more cost-effective and convenient, they are not without drawbacks. Carefully consider the current interest rates, your ability to repay, and the possible impact on your overall financial stability before making a decision.
What is the monthly payment on a $100,000 HELOC?
The monthly payment for a $100,000 home equity line of credit (HELOC) can fluctuate based on the prevailing interest rate, the chosen repayment term, and the amount you draw. For example, if the interest rate is set at 7.25% and the repayment term is 10 years, the monthly payment would hover around $1,174.
What are the benefits of a HELOC?
HELOC loans provide numerous advantages, including flexible access to funds, competitive interest rates, and potential tax benefits. These versatile loans can be utilized for a wide range of purposes, encompassing home renovations, education expenses, and debt consolidation. However, responsible management of the loan is crucial to avoiding financial strain and ensuring a positive borrowing experience.
Do you need an appraisal for a HELOC?
In most cases, a HELOC loan requires an appraisal to ascertain the property’s current market value. However, some lenders may offer appraisal-free options based on automated valuation models. The appraisal serves as a crucial safeguard to ensure that the loan amount does not surpass the property’s equity, safeguarding both the borrower and the lender.
What disqualifies you from getting a home equity loan?
Several factors, including a low credit score, inadequate home equity, a high debt-to-income ratio, and unstable income, can impede your ability to secure a home equity loan.
How difficult is it to get a HELOC?
Obtaining a HELOC can be challenging due to various factors, primarily credit score, home equity, and income stability. Generally, lenders mandate a minimum credit score of 680, along with home equity of at least 15%. Assessing your financial situation in advance can significantly improve your chances of qualifying for a HELOC.
Does HELOC affect credit score?
HELOC loans can impact your credit score in various ways. Submitting an application for a HELOC may trigger a hard inquiry, which can temporarily cause a small reduction in your score. Conversely, prudent use and punctual payments can contribute to maintaining or even enhancing your credit score.
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More HELOC resources.
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What is a Home Equity Line of Credit
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Different Types of Home Equity Loans
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HELOC vs Home Equity Loan: How They Compare