HELOC vs. Home Equity Loan

Here at MoneyFor, our goal is to help you make informed financial decisions. We are committed to accuracy and impartiality in all our content. It’s important to note that articles may reference products from our partners who compensate us. This influences which products we feature and their presentation on our site, not our evaluation.

Key takeaways

HELOCs and home equity loans let you borrow against your home’s equity. You’ll receive a lower interest rate but risk losing your house.
A HELOC provides revolving credit with variable rates and flexible withdrawal periods. They are good for ongoing or uncertain costs.
A home equity loan offers a lump sum with fixed rates and predictable payments, which is ideal for one-time expenses.

Being a homeowner comes with a few advantages. One is the ability to tap into your home’s equity or value for cash.

Two home equity borrowing options are a home equity loan and a home equity line of credit (HELOC). Both lend you money at a low interest rate since you’re borrowing against your home’s value. Many people use a HELOC or home equity loan for home improvement, paying off debt, college costs, or other major expenses.

While similar, they function differently. A home equity loan gives you a lump sum that you repay with fixed payments, while a HELOC is similar to a credit card. In this article, we’ll discuss how they work, their pros and cons, and help you decide which makes more sense for you.

What is home equity?

Home equity is the portion of your house that you truly own. It is the difference between your property’s market value and the balance you owe on your mortgage.

Most homeowners first earn equity by making a down payment. Your equity grows as you pay down the mortgage or your home’s value increases.

For example, you buy a house worth $300,000 and make a $50,000 down payment. Your equity is $50,000. Your home’s value increases to $350,000 and you owe $150,000 on your mortgage. You now have $200,000 in equity.

Home equity can be a powerful financial tool. You can borrow against a portion of your equity (up to 80%) by taking out a home equity loan or a HELOC. From the example above, that would be $160,000.

What is a HELOC loan?

A HELOC is a revolving line of credit secured by your home. It works more like a credit card than a regular loan. You’re able to access funds as needed, up to a set limit, and only pay interest on the amount used.

HELOCs consist of a draw period and a repayment period. The draw period typically lasts five to ten years. During this time, you borrow as needed within your available credit.

Monthly payments are usually interest-only during this period. Though some lenders require you to pay a portion of the principal.

After the draw period ends, you enter the repayment phase. Repayment typically lasts 10 to 20 years. During this time, you can no longer withdraw money. Instead, you make monthly payments that cover the principal and the interest.

Determining upfront how long the full term of a HELOC loan is can help you decide if it suits your financial goals. Budgeting for a HELOC can be tricky since the payments are unpredictable.

A significant reason for this is that HELOC interest rates are usually variable. They rise or fall based on market conditions. As they fluctuate, so do your monthly payments. Some lenders now offer fixed-rate conversion options to help manage changing HELOC loan rates.

HELOCs are ideal for ongoing expenses where you need flexible access to cash. Typical uses include home renovations, medical bills, and tuition costs. Many people use HELOCs for home repairs and deduct the interest from their taxes.

Want extra cash?

Click here to borrow $1,000 now!

How to get a HELOC loan

The first step in learning how to apply for a HELOC loan is to calculate your home equity levels.

Check your equity: Lenders typically require you to have a minimum of 15% to 20% equity in your home. To determine your equity, subtract your mortgage balance from your home’s current market value.

Gather required documents: Lenders ask for the following:

Government-issued ID (driver’s license, state ID, or passport)
Proof of income (pay stubs, W-2s, or tax returns)
Mortgage statements
Property tax records
Homeowners Insurance
Recent bank statements

Compare lenders: Shop around and compare offers. Look closely at the fees, repayment terms, and interest rates.

Submit your application: You can apply online, over the phone, or in person.

Home appraisal: Most lenders require a home appraisal to determine the current value of your property. The current value influences the loan amount.

Closing costs: Like mortgages, HELOCs come with closing costs. You can pay the fee upfront or roll it into the price of the loan.

Access your funds: Once approved, the lender will give you a checkbook, credit card, or transfer funds to your bank account. The whole process usually takes two to six weeks.

HELOC loan requirements

To be eligible for a HELOC, you must show that you can afford to borrow and have sufficient equity.

A strong credit score is also essential. The minimum credit score for a HELOC is typically around 620, but most lenders prefer scores above 700. Before applying, it’s smart to check your credit score and address any issues dragging it down.

You can get a HELOC with bad credit if you have significant equity and stable income. The best HELOC lenders for bad credit will be transparent about loan terms, interest rates, and additional conditions.

Lenders also consider your debt-to-income ratio (DTI). Your DTI is the percentage of your income that goes toward paying debts. Most lenders require a DTI under 43%.

As with other forms of borrowing, lenders also require a stable income. A reliable income indicates that you can repay the loan.

Pros and cons of a HELOC

Pros:

Borrow as needed during the draw period
Interest-only payments during the draw period
Revolving credit that you can use, repay, and borrow again
Lower initial interest rate than most unsecured loans
Good for ongoing expenses
Don’t pay unless you use the money
Interest can be tax-deductible if used for home improvements
Access to funds over a 10-year draw period
Open to refinance after the draw period ends

Cons:

Variable interest rates can raise your monthly payments
Easy access to funds can lead to overspending
You can lose your home if you don’t repay
Monthly payments can significantly increase when the repayment phase begins
Budgeting is harder since payments are unpredictable
Lenders can reduce or freeze your credit line if your home value drops

What is a home equity loan?

A home equity loan works by allowing you to borrow a lump sum based on the value of your home. You then repay the money over a set term with regular monthly payments. Repayment terms range from five to 30 years.

Home equity loan rates as fixed. As a result, your interest rate and monthly payments remain the same throughout the life of the loan.

Interest rates are also generally lower than unsecured loans or credit cards. The reason is that your home secures the loan. While you’ll pay less interest, missing payments could put your home at risk.

These loans are best suited for large, one-time expenses. A home equity loan works exceptionally well for home improvements. When used for this purpose, the interest is tax deductible.

How to get a home equity loan

Applying for a home equity loan is the same as applying for a HELOC.

New

Turn easy tasks into real rewards –
worth up to $499/year!

Assess your home equity: Calculate how much value you have in your home. The amount of equity affects whether you qualify and for how much.

Gather your documents: You must provide proof of income, recent bank statements, and homeowner’s insurance. Lenders will also want information about your existing mortgage and other debts.

Shop around & apply: It’s important to explore different home equity loan options before applying. Compare interest rates, fees, and terms, as they vary widely.

Get home appraised: Appraisals determine your home’s current value, which influences the loan amount.

Apply: Submit your documentation and undergo a credit check.

Wait for approval: The process can take anywhere from a few days to a few weeks. If you’re hoping for fast home equity loans, gather all your documents early and make sure they’re accurate.

Receive your funds: Once approved, you must pay a closing cost. You can pay the fee upfront to avoid interest or include it in your monthly payments. The lender will then send the proceeds to your bank account.

Home equity loan requirements

To qualify for a home equity loan, you need to have at least 15% to 20% equity. This is the portion you’ve paid off compared to your home’s market value. Your combined loan to value ratio (CLTV) should not exceed 80% of your home’s appraised value.

The required credit score for a home equity loan is generally over 700. You may be able to find lenders who accept scores as low as 620. If you can, take the time to improve your credit score.

If your credit score is low, you may still qualify for bad credit home equity loans. Lenders are more likely to consider you if you have substantial equity, low debt, and a reliable income. Some credit unions and online lenders offer options close to a guaranteed home equity loan for bad credit borrowers.

Lenders also consider your debt-to-income ratio. A lower DTI, typically below 43%, indicates that you have a manageable debt level and can afford the loan. You will also need a reliable income to make monthly payments.

A recent foreclosure or bankruptcy will disqualify you from getting a home equity loan.

Pros and cons of a home equity loan

Pros:

Fixed interest rates for predictable payments
Lump sum payout may help prevent overspending
Lower interest rates than personal loans and credit cards
Interest may be tax-deductible if used for home improvements
Lower closing costs than refinance
Set monthly payments make budgeting easier and more predictable

Cons:

Risk of losing your home if you don’t repay your loan
Higher closing costs & initial payments than a HELOC
Repayment begins immediately
Fixed rates prevent benefiting from future rate drops
Can’t borrow additional funds without a new loan

Differences between a HELOC and a home equity loan

HELOCs and home equity loans differ in how lenders disburse and borrowers repay the funds.

A HELOC gives you access to money as needed. You can withdraw and repay as you like for the first five to ten years. Payments are initially interest only, but the rate is variable. The structure is good if you need flexibility for ongoing expenses.

A home equity loan is an installment loan. You receive all the money upfront and repay it at fixed monthly payments. These loans are suitable for large, one-time expenses.

Look at the chart below outlining the differences:

	HELOC	Home Equity Loan
Lump sum		√
Withdraw as needed	√
Variable interest rate	√
Fixed interest rate		√
Fixed monthly payment		√
Reapply for additional funds		√
Pay interest on the amount used	√
Interest-only payment period	√

Which is best for you: HELOC or home equity loan?

A HELOC is best if you don’t know how much you need and want ongoing access to funds. Its flexible borrowing structure and interest-only payments make it appealing for variable costs.

You need to budget for changing interest rates and control your spending, even with easy access to credit.

A home equity loan is a good choice if you need a large amount of money at once to cover a sizeable immediate expense. The fixed monthly payments are good if you prefer stability.

Looking for yet another loan?

Find out how many loans you can have at once

Alternatives to home equity loans and HELOCs

HELOCs and home equity loans are appealing because of their lower costs, but they are risky. If you default, you could lose your home.

Here are a few other options that don’t put your property on the line.

Loans for home improvement

A HELOC for home improvement gives you flexible access to funds for ongoing renovations. A home improvement loan gives you a lump sum of cash to use for renovations, repairs, or upgrades. These loans are unsecured, meaning you don’t have to provide collateral.

Lenders instead base approval on your credit score, DTI, and income. The interest rates usually start around 6.99%, higher than secured loans.

You may be able to find home improvement loans for bad credit. Look for online lenders and visit credit unions that accept applicants with lower scores. Pay down any debts, as a lower DTI will make you a more attractive candidate.

Urgent loans for bad credit

If you need money quickly and have a low credit score, consider online lenders and credit unions. Look for bad credit loans with guaranteed approval, but be sure to read the fine print. No lender will approve everyone. Loans for consumers with poor scores often have high interest rates and unfavorable terms.

Cash-out refinance

A cash-out refinance is when you replace your existing mortgage with a new, larger loan. Use the new loan to pay off your mortgage balance and receive the difference in cash.

The new mortgage may have higher interest rates and a longer repayment term. Like HELOCs and home equity loans, you use your property as collateral. If you are unable to pay, you could lose your home to foreclosure.

Personal loan

A personal loan is an unsecured loan you can use for anything. They are typically installment loans with repayment terms of two to seven years. Interest rates tend to be higher, but you are not risking your property.

Frequently asked questions

1. What is the monthly payment on a $50,000 HELOC?

The monthly payment depends on the interest rate, repayment phase, and how much you spend. During the draw period, you may only pay interest. If you spent the entire $50,000 and your interest rate is 6%, you’d pay $250 per month. After that, full payments on a 10-year term would be around $555 per month.

2. Which is better: a HELOC or a home equity loan?

A HELOC is better for flexible, ongoing expenses. A home equity loan is better for fixed, one-time costs. The right choice depends on what you need the money for and if you prefer installment or revolving credit.

3. How long are home equity loans?

Home equity loans are typically repaid over 5 to 30 years.

4. Can you get a home equity loan with bad credit?

Some lenders offer home equity loans for bad credit, but the terms will be less favorable. You may face higher interest rates or need more equity.

5. Can you get a HELOC with bad credit?

You may be able to get a HELOC loan for bad credit, but it will be challenging. Most lenders require good credit above 680. To increase your approval odds, build up equity and lower your debt-to-income ratio.

6. Why are most personal loans much smaller than mortgages and home equity loans?

Personal loans are often smaller than mortgages and home equity loans because they are unsecured. Since lenders take on more risk, they limit the loan amounts to minimize potential losses. With a mortgage or home equity loan, your property secures the loan. The collateral reduces the risk for lenders and allows them to offer much larger loan amounts.

7. How long does it take to get a HELOC loan?

It typically takes two to six weeks to receive a HELOC. The time depends on the lender, appraisal, and how quickly you submit documents.

8. Does a HELOC affect your credit score?

HELOCs will impact your credit score by lengthening your credit history and increasing your available credit. An unused HELOC can affect your credit score by lowering your utilization ratio, which is a good thing. Timely payments will improve your score, while missed payments will hurt it.

Bottom line

HELOCs and home equity loans can both be smart and cost-effective ways to pay for substantial expenses. They are especially useful for home improvements that increase your property’s value. Best yet, interest is often tax deductible when you use the funds for home repairs.

Choose a HELOC if you have a long, ongoing project or prefer the flexibility of revolving credit. A home equity loan is best if you know how much you need and like the stability of fixed monthly payments. Both options let you access the equity you’ve built to borrow at a lower interest rate.

Whichever route you decide to take, shop around with different lenders. It pays to prequalify and compare options to ensure you get the best deal.

1. Paycheck Advance is For eligible customers only. Your actual available Paycheck Advance amount will be displayed to you in the mobile app and may change from time to time. Conditions and eligibility may vary and are subject to change at any time, at the sole discretion of Finco Advance LLC, which offers this optional feature. Finco Advance LLC is a financial technology company, not a bank. Expedited disbursement of your Paycheck Advance is an optional feature that is subject to an Instant Access Fee and may not be available to all users. Expedited disbursements may take up to an hour. For more information, please refer to Paycheck Advance Terms and Conditions.

2. Paycheck Advance is an earned wage access service and is not a loan or credit product.

3. Current is a financial technology company, not an FDIC-insured bank. FDIC insurance up to $250,000 only covers the failure of an FDIC-insured bank. Certain conditions must be satisfied for pass-through deposit insurance coverage to apply. Banking services provided by Choice Financial Group, Member FDIC, and/or Cross River Bank, Member FDIC. The Current Visa® Debit Card, which may be issued by Choice Financial Group and/or Cross River Bank, and the Current Visa® secured charge card, which is issued by Cross River Bank, are all issued pursuant to licenses from Visa U.S.A. Inc. and may be used everywhere Visa debit or credit cards are accepted. A Current debit account is required to apply for the Current Visa® secured charge card. Independent approval required.

4. Faster access to funds is based on comparison of traditional banking policies and deposit of paper checks from employers and government agencies versus deposits made electronically. Direct deposit and earlier availability of funds is subject to timing of payer’s submission of deposits.

5. Debit card: Fees may apply, including out of network cash withdrawal fees, third-party fees, cash load fees, inactivity fees, account closure fees, international transaction fees, replacement card fees, express mail fees and escheatment fees. Build Card: Some fees may apply, including out of network ATM fees of $2.50 per transaction, late payment fees of 3% of any total due balance outstanding and past due for two or more billing cycles, foreign transaction fees of 3% of the full transaction amount (minimum $0.50), card replacement fees per card of $5 for regular delivery and $30 for expedited delivery, cash deposit fees of $3.50 per deposit, and third party processing fees.

6. Current is a financial technology company, not a bank. Banking services provided by Choice Financial Group, Member FDIC, and Cross River Bank, Member FDIC. The Current Visa® Debit Card is issued by Choice Financial Group pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. The Current Visa® secured charge card is issued by Cross River Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted. Please see the back of your Card for its issuing bank. Current Individual Account required to apply for the Current Visa® secured charge card. Independent approval required.

7. Individual results may vary. Using your credit card responsibly may allow you to improve your credit score. Credit building depends on various factors, including your payment history, credit utilization, length of credit history, and other financial activities.

8. Faster access to funds is based on comparison of traditional banking policies and deposit of paper checks from employers and government agencies versus deposits made electronically. Direct deposit and earlier availability of funds is subject to timing of payer’s submission of deposits.

9. Current is a financial technology company, not a bank. Banking services provided by Choice Financial Group. Funds held in Savings Pods are FDIC-insured on a pass-through basis up to $250,000 at our partner bank Choice Financial Group, member FDIC.

10. Paycheck Advance is For eligible customers only. Your actual available Paycheck Advance amount will be displayed to you in the mobile app and may change from time to time. Conditions and eligibility may vary and are subject to change at any time, at the sole discretion of Finco Advance LLC, which offers this optional feature. Finco Advance LLC is a financial technology company, not a bank.

11. Expedited disbursement of your Paycheck Advance is an optional feature that is subject to an Instant Access Fee and may not be available to all users. Expedited disbursements may take up to an hour. For more information, please refer to Paycheck Advance Terms and Conditions.

12. Actual overdraft amount may vary and is subject to change at any time, at Current’s sole discretion. In order to qualify and enroll in the Fee-Free Overdraft feature, you must receive $500 or more in Eligible Direct Deposits into your Current Account over the preceding 35-day period and fulfill other requirements subject to Current’s discretion. Negative balances must be repaid within 60 days of the first Eligible Transaction that caused the negative balance. For more information, please refer to Fee-free Overdraft Terms and Conditions. Individual Current Accounts only.

13. For eligible customers only. You may earn Points in connection with your Build Card purchases at retailers whose merchant code is classified as: Dining (e.g., restaurants) and Groceries (e.g., supermarkets) and by completing other actions that Current designates as subject to the Current Points Program. The amount of Points granted for different actions as well as the purchase requirements necessary to earn Points will vary, and is subject to Current’s sole discretion. After qualifying, please allow 3-5 business days for points to post to your Current account. Points will expire 365 days after they settle. For more information (including specific eligibility criteria), please refer to the Current Points Terms and Condition.

14. Some fees may apply, including out of network ATM fees of $2.50 per transaction, late payment fees of 3% of any total due balance outstanding and past due for two or more billing cycles, foreign transaction fees of 3% of the full transaction amount (minimum $0.50), card replacement fees per card of $5 for regular delivery and $30 for expedited delivery, cash deposit fees of $3.50 per deposit, and third party processing fees.

15. Boost Bonuses are credited to your Savings Pods within 48 hours of enabling the Boost feature and on a daily basis thereafter, provided that the Savings Pod has accrued a Boost Bonus of at least $0.01. No minimum balance required. The Boost rate on Savings Pods is variable and may change at any time. The disclosed rate is effective as of August 1, 2023. Must have $0.01 in Savings Pods to earn a Boost rate of either 0.25% or 4.00% annually on the portion of balances up to $2000 per Savings Pod, up to $6000 total. The remaining balance earns 0.00%. To earn a Boost rate of 4.00%, the sum of your Eligible Payroll Deposits over a rolling 35-day period must be $500 or more, with at least one Eligible Payroll Deposit equalling a minimum of $200. For more information, please refer to Current Boost Terms and Conditions.

16. Current is a financial technology company, not a bank. Banking services provided by Choice Financial Group. Your money is FDIC-insured on a pass-through basis up to $250,000 at each of our partner banks, Choice Financial Group and Cross River Bank, members FDIC.

17. Average value based on Fine Hotels + Resorts bookings in 2023 for stays of two nights. Benefits include daily breakfast for two, room upgrade upon arrival when available, $100 amenity, guaranteed 4PM late checkout, and noon check-in when available. Certain room categories not eligible for upgrade. $100 amenity varies by property. Actual value will vary based on property, room rate, upgrade availability, and use of benefits.

18. Up to $500 per Covered Trip that is delayed for more than 6 hours; and 2 claims per Eligible Card per 12 consecutive month period. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.

19. The maximum benefit amount for Trip Cancellation and Interruption Insurance is $10,000 per Covered Trip and $20,000 per Eligible Card per 12 consecutive month period. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.

20. Baggage Insurance Plan coverage can be in effect for Covered Persons for eligible lost, damaged, or stolen Baggage during their travel on a Common Carrier Vehicle (e.g. plane, train, ship, or bus) when the Entire Fare for a ticket for the trip (one- way or round-trip) is charged to an Eligible Card. Coverage can be provided for up to $2,000 for checked Baggage and up to a combined maximum of $3,000 for checked and carry-on baggage, in excess of coverage provided by the Common Carrier. The coverage is also subject to a $3,000 aggregate limit per Covered Trip. For New York State residents, there is a $2,000 per bag/suitcase limit for each Covered Person with a $10,000 aggregate maximum for all Covered Persons per Covered Trip. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.

21. Car Rental Loss and Damage Insurance can provide coverage up to $75,000 for theft of or damage to most rental vehicles when you use your eligible Card to reserve and pay for the entire eligible vehicle rental and decline the collision damage waiver or similar option offered by the Commercial Car Rental Company. This product provides secondary coverage and does not include liability coverage. Not all vehicle types or rentals are covered. Geographic restrictions apply. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company. Car Rental Loss or Damage Coverage is offered through American Express Travel Related Services Company, Inc.

22. Coverage for a Stolen or damaged Eligible Cellular Wireless Telephone is subject to the terms, conditions, exclusions, and limits of liability of this benefit. The maximum liability is $800, per claim, per Eligible Card Account. Each claim is subject to a $50 deductible. Coverage is limited to two (2) claims per Eligible Card Account per 12 month period. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.

23. When an American Express® Card Member charges a Covered Purchase to an Eligible Card, Extended Warranty§ can provide up to one extra year added to the Original Manufacturer’s Warranty. Applies to warranties of five (5) years or less. Coverage is up to the actual amount charged to your Card for the item up to a maximum of $10,000; not to exceed $50,000 per Card Member account per calendar year. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.

24. Purchase Protection is an embedded benefit of your Card Membership and requires no enrollment. It can help protect Covered Purchases made on your Eligible Card when they’re accidentally damaged, stolen, or lost, for up to 90 days from the Covered Purchase date. The coverage is limited to up to $10,000 per occurrence, up to $50,000 per Card Member account per calendar year. Coverage Limits Apply. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.

25. Chime is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC.

26. The secured Chime Credit Builder Visa® Card is issued by Stride Bank, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted.

27. Banking services and debit card provided by The Bancorp Bank N.A. or Stride Bank, N.A., Members FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted.

28. The Annual Percentage Yield (“APY”) for the Chime Savings Account is variable and may change at any time. The disclosed APY is effective as of September 20, 2023. No minimum balance required. Must have $0.01 in savings to earn interest.

29. There’s no fee for the Chime Savings Account. Cash withdrawal and Third-party fees may apply to Chime Checking Accounts. You must have a Chime Checking Account to open a Chime Savings Account.

30. To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Chime Checking Account. The qualifying direct deposit must be from your employer, payroll provider, gig economy payer, or benefits payer by Automated Clearing House (ACH) deposit OR Original Credit Transaction (OCT). Bank ACH transfers, Pay Anyone transfers, verification or trial deposits from financial institutions, peer to peer transfers from services such as PayPal, Cash App, or Venmo, mobile check deposits, cash loads or deposits, one-time direct deposits, such as tax refunds and other similar transactions, and any deposit to which Chime deems to not be a qualifying direct deposit are not qualifying direct deposits.

31. Money added to Credit Builder will be held in a secured account as collateral for your Credit Builder Visa card, which means you can spend up to this amount on your card. This is money you can use to pay off your charges at the end of every month.

32. Based on a representative study conducted by Experian®, members who made their first purchase with Credit Builder between June 2020 and October 2020 observed an average FICO® Score 8 increase of 30 points after approximately 8 months. On-time payment history can have a positive impact on your credit score. Late payment may negatively impact your credit score.

33. On-time payment history may have a positive impact on your credit score. Late payment may negatively impact your credit score. Chime will report your activities to Transunion®, Experian®, and Equifax®. Impact on your credit may vary, as Credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.

34. Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date.

35. SpotMe® on Debit is an optional, no fee overdraft service attached to your Chime Checking Account. To qualify for the SpotMe on Debit service, you must receive $200 or more in qualifying direct deposits to your Chime Checking Account each month and have activated your Visa debit card. Qualifying members will be allowed to overdraw their Chime Checking Account for up to $20 on debit card purchases and cash withdrawals initially but may later be eligible for a higher limit of up to $200 or more based on Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. The SpotMe on Debit limit will be displayed within the Chime mobile app and is subject to change at any time, at Chime’s sole discretion. Although Chime does not charge any overdraft fees for SpotMe on Debit, there may be out-of-network or third-party fees associated with ATM transactions. SpotMe on Debit will not cover any non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. SpotMe on Debit Terms and Conditions.

36. Tipping or not tipping has no impact on your eligibility for SpotMe®.

37. Out-of-network ATM withdrawal fees may apply except at MoneyPass ATMs in a 7-Eleven, or any Allpoint or Visa Plus Alliance ATM.

38. Save When I Get Paid automatically transfers 10% of your direct deposits of $500 or more from your Checking Account into your savings account.

39. Round Ups automatically round up debit card purchases to the nearest dollar and transfer the round up from your Chime Checking Account to your savings account.

40. Mobile Check Deposit eligibility is determined by Chime in its sole discretion and may be granted based on various factors including, but not limited to, a member’s direct deposit enrollment status.

41. Funds are automatically debited from your Checking Account and typically deposited into the recipient’s Checking Account within seconds. Pay Anyone transactions will be monitored and may be held, delayed or blocked if the transfer could result in fraud or another form of financial harm. Sometimes instant transfers can be delayed.

42. Pay Anyone transactions will be monitored and may be held, delayed or blocked if the transfer could result in fraud or another form of financial harm. Sometimes instant transfers can be delayed. Non-Chime members must use a valid debit card to claim funds.

* EarnIn is not available for Connecticut residents

Rachel Alulis

Rachel Alulis has been the lead editor for Moneyfor’s credit cards team since 2015 and for the financial rewards team since 2023. Before joining Moneyfor, Rachel worked at USA Today and the Des Moines Register. She then established a successful freelance writing and editing business specializing in personal finance. Rachel holds a bachelor’s degree in journalism and an MBA.

HELOC vs. Home Equity Loan

Key takeaways

Jump to:

What is home equity?