What does the Draw Period of a US Home Equity Loan (HELOC) mean? How long is the Draw Period usually?

What to do before the HELOC draw period expires?

It is important to understand in advance how long the HELOC withdrawal period is, so that you don’t find out you can’t withdraw the money on the due date, or you are surprised by a sudden large bill.

When the draw period is due, the homeowner needs to confirm in advance the amount of the loan he or she owes, the approximate monthly payment, and the interest rate. Generally speaking, the interest rate is fixed during the repayment period, but there are also HELOC projects that use a variable-rate HELOC, so if the homeowner is worried that the interest rate will fluctuate too much in the future, there is still time to adjust to a fixed-rate HELOC during the draw period.

If the homeowner has not paid back the principal during the draw period, be prepared for a sudden increase in monthly payments when the draw period comes to an end! Generally speaking, the monthly payments during the repayment period are twice as much as during the draw period, because during the draw period, the homeowner only has to pay the interest. The homeowner must make sure that he or she can afford the loan during the repayment period, after all, the HELOC is secured by the house.

The application standard for HELOC is generally a minimum FICO credit score of 680. Because the house is used as collateral, homeowners should weigh the pros and cons and whether HELOC is appropriate based on their personal circumstances.