Are Checking and Savings Accounts Assets?

Checking accounts and savings accounts are typically considered assets, since they have a positive financial value. They represent accessible money that is part of your personal wealth and can be used as you like. Other types of bank accounts, including certificates of deposit (CDs) or money market accounts, are also assets.
Knowing what kind of assets you have, including checking and savings accounts, can make it easier to calculate your net worth. Learn more about how your bank accounts and assets work.

What Is an Asset?

An asset is something you own that has intrinsic value. Examples of assets can include bank accounts, cash, a home or other real estate, vehicles, retirement accounts, and brokerage accounts. In addition, assets can include art, antiques, jewelry, and other objects of value.

Some assets can rise in value over time.

•   For instance, real estate can appreciate or grow in value over time.

•   Similarly, as you earn interest on your savings account, your wealth can increase. Or if you get a bonus at work and deposit it, that too can build your net worth.

Assets may also diminish or lose value over time.

•   For example, if you had $20,000 in your emergency fund but have to withdraw $10,000 for major dental work, that asset has decreased. You still have $10,000 in the account, but that’s less than you previously had in the plus column, financially speaking.

•   Stocks can also lose value due to shifting economic and other forces. So, a stock you paid $100 per share for yesterday might be worth $75 per share tomorrow.

However, as long as your savings account has a positive balance and those stocks have some value, they’re still considered to be an asset.

Assets vs Liabilities

Assets are one part of the equation when you’re calculating net worth. Your net worth is a measure of what you own versus what you owe. To find your net worth, you’d subtract your liabilities or debts from your assets.

•   When your net worth is positive, that means you have more assets than debts. When net worth is zero, it means your assets and liabilities are equal to one another. Effectively, they cancel each other out.

•   Can you have a negative net worth? Certainly, if your debts exceed your assets. For instance, if your only assets are $5,000 in a checking account and $10,000 in a savings account but you owe $40,000 in student loan debt, your net worth would be -$25,000 at this moment in your life.

Keep in mind that it takes time to build wealth. Assets tend to accumulate over time (say, as savings in your retirement account grow), so don’t be discouraged if you are early in your career and in negative net worth territory.

How Are Assets Categorized?

There are different ways to group assets, depending on the context in which you’re discussing them. You can think of assets in terms of liquidity.

•   Liquid assets are ones that can easily be converted to cash. For instance, if you have $10,000 in your savings account, you could quickly access those funds in a variety of ways (electronic transfer, for instance). If you own 100 shares of stock, you could sell them for cash.

•   Illiquid assets, on the other hand, are ones that can’t easily be sold for cash. Real estate is an example of an illiquid asset, since it can take time to find a buyer and complete the sale. Your grandmother’s diamond engagement ring, which might be sitting in a safe deposit box, is another example. While it has value, it would likely take some time to have it appraised and find the right buyer.

In business and accounting, assets can also be categorized as tangible or intangible.

•   Tangible assets are things that you can physically see and touch. If you own a restaurant, for example, then kitchen equipment is a tangible asset. (If someone were to ask you if you had tangible assets, they might be referring to, say, artwork or jewelry.)

•   Intangible assets include things like trademarks, patents, and copyrights. You might also think of intangible assets as intellectual property, or IP.

In addition, if you are talking about investments, you might group assets into such categories as stocks, bonds, commodities, and other categories.

Recommended: Explaining the Different Types of Asset Classes

Is a Savings Account an Asset?

A savings account is an asset since it has financial value and is something you own, not something you owe money to (which would be what’s known as a liability). That’s true, regardless of whether you have $5 in your savings account or $500,000.

Savings accounts are secure places to keep assets that you can access fairly easily. If you’re saving in a bank that is insured by the Federal Deposit Insurance Corporation, or FDIC — and most banks are — then your deposits are insured up to $250,000 per depositor, per ownership category, per insured institution. Credit unions typically offer similar coverage via the National Credit Union Administration (NCUA).

Depending on where you choose to keep your savings, you could also earn a competitive interest rate (expressed as annual percentage yield, or APY, which reflects the power of compounding interest) on deposits.

Different savings account types include:

•   Basic or standard savings accounts

•   High-yield savings accounts, which can offer as much as several times the interest rate that standard savings accounts deliver

•   Money market accounts, which combine the features of checking and savings accounts

A CD can also be considered a savings account, but it works somewhat differently. Rather than allowing you to dip into savings whenever you like, CDs are term deposits, meaning they have a set maturity date at which you can either withdraw or roll over the funds. Taking money out before the maturity date typically triggers an early withdrawal penalty.

Recommended: How to Switch Banks

Is a Checking Account an Asset?

A checking account is an asset, just like a savings account. The main difference between a checking account and a savings account is how they’re meant to be used.

•   Checking accounts are designed for spending. You can use a checking account to pay bills online, transfer funds to friends and family, or make purchases using a linked debit card. Unlike savings accounts, checking accounts typically don’t earn interest, though some may earn a small amount. But it’s for this reason that you probably don’t want too much cash just sitting in a checking account. Moving some of the funds to a savings account could help your money grow into an even bigger asset.

•   Savings accounts are designed to hold money that you don’t plan to spend right away. You might use a savings account to stockpile your emergency fund or set aside money for an important short-term goal, like buying a new car or paying for a wedding. Because the money typically sits in a savings account for a while, the depositor is rewarded with interest.

You can keep your checking account and savings account at the same bank for convenience. However, if you’re using a brick-and-mortar bank for checking, you might get more bang for your buck by keeping your savings account at an online bank. Online banks typically pay higher rates to savers than traditional banks.

Checking and Savings Accounts on a Balance Sheet

Here’s an overview of how your banking assets can be viewed in a business context. Businesses use a balance sheet to see at a glance how much money is moving in and out. Checking and savings accounts can be included on a balance sheet and are usually listed under “current asset, cash.”

A balance sheet is intended to capture how a business’s assets compare to its liabilities over a specific time period. Businesses can use balance sheets to get an idea of how financially healthy they are. When applying for loans, lenders may ask to see an up-to-date balance sheet, along with a profit and loss statement or cash flow statement.

The Takeaway

Understanding that checking and savings accounts are assets can be an important step in building your financial literacy. What’s more, recognizing that these bank accounts add to your net worth can help you make smarter decisions with your money. One of those decisions centers on where to keep your bank accounts.

If you’re interested in helping the money in your bank accounts grow, then SoFi could be a great fit.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What kind of asset is a savings account?

A savings account is a liquid asset, since you can easily tap into the cash in your account if needed. Savings accounts offer a convenient way to set aside money for emergencies or other goals, while earning some interest in the process. These assets can contribute to your net worth calculations, along with your other assets.

Is your savings account a liability?

A savings account is an asset (meaning it contributes to your net worth and personal wealth), not a liability, which is an obligation to pay another party. The only way that a savings account could become a liability is if you were to overdraw your account. In that case, you would need to make a deposit to bring your account balance to or above zero.

Is a savings account an asset or equity?

Savings accounts are assets since you own the money in them outright. (Also, if you’re wondering, a checking account is an asset, too.) Equity is a term you’ll hear when talking about investing. For example, when you buy a share of stock you’re getting equity, or an ownership stake, in the company.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

You may have heard of both FICO® and Experian, but the two companies serve different purposes.

FICO is a credit scoring model developed by the Fair Isaac Corporation (FICO) that lenders often use when assessing a borrower’s creditworthiness, or how likely they are to repay debts.

Experian, on the other hand, is one of the three major credit bureaus (along with Equifax and TransUnion) that collects credit and debt information and uses it to create individual credit reports. These credit reports offer more details about an individual’s credit history than FICO’s three-digit score.

Let’s take a closer look at what separates FICO vs. Experian, which credit score is the most accurate, and how to keep tabs on your credit score.

What Is the Difference Between Experian Score vs. FICO?

As we mentioned, Experian is a major credit reporting agency. It does not have its own credit scoring model. However, in 2006, it partnered with Equifax and TransUnion to create the VantageScore credit score model. Like FICO, VantageScore provides three-digit credit scores for consumers, though it uses slightly different factors and weightings.

The credit score Experian provides — sometimes called an “Experian score” — relies on both VantageScore and FICO Score.

FICO works differently. As a credit scoring model, it uses a proprietary algorithm to evaluate your credit risk. Specifically, the following factors affect your credit score:

•   Your payment history

•   The amounts you owe

•   The length of your credit history

•   How much new credit you have

•   The diversity of your credit mix

While FICO is used in the majority of lending decisions, some lenders use VantageScore.

Which Credit Report Is Most Accurate?

It’s common to have multiple credit reports, including ones with Experian, Equifax, and TransUnion. It’s also common to have minor differences in your credit file from bureau to bureau. That’s because lenders don’t always report the same information at the same time to every bureau. But rest assured, credit reports from all three credit bureaus are widely considered to be accurate.

That said, it’s a good idea to regularly review your credit report. You can access yours for free via AnnualCreditReport.com or through tools like a money tracker app.

If you find any errors or inconsistencies in your credit report, be sure to dispute them with the relevant credit bureau so the incorrect information can be removed.

Why Is My Experian Credit Score Different From FICO?

You may notice that your so-called Experian score is slightly different from your FICO Score. That’s because both scores are based on different scoring models. FICO uses its own algorithm, while Experian’s score uses both FICO and VantageScore.

While some variations are to be expected, if one score is drastically higher or lower than the other, it’s a good idea to review your credit reports and address inaccuracies.

Is Experian Better Than FICO?

No credit score is better than another. Some lenders prefer FICO, white others rely on VantageScore. Each model can provide lenders with different insights about a person’s financial habits.

The good news is that FICO and VantageScore generally calculate their scores with similar information, which means you can improve both scores simultaneously. Smart strategies include paying bills on time, keeping credit utilization low, and paying down balances.

Recommended: How Long Does It Take to Build Credit?

Is a FICO Score the Same as a Credit Score?

When comparing a FICO Score vs. a credit score, it’s important to understand that a FICO Score is a type of credit score. But of course, it’s not the only type of credit score.

VantageScore, for example, issues credit score models such as VantageScore 4.0 and VantageScore 4plus™. Experian, Equifax, and TransUnion also provide credit scores based on data in your credit report.

What Is My Real Credit Score?

There is no one true credit score. Instead, banks, lenders, and other companies may use different credit scores when they check your credit. And they could see different figures, depending on which credit score they use.

Fortunately it’s relatively straightforward to check your credit score without paying. That way, you can get an idea of what your credit score is and what lenders might see when they check your credit.

What Score Do Lenders Use?

Lenders can and do consider a variety of credit scores, depending on which scoring model works the best for their specific lending criteria. Unfortunately, it’s often difficult or even impossible to know which model a particular lender uses. However, the factors that impact your credit score generally hold true regardless of the credit score model used.

Understanding Various Credit Score Models

While most credit score models start with some of the same basic data, each one uses different information and weighs credit history information differently. This can mean that the different credit score models, such as FICO and VantageScore, come up with different credit scores, even for the same consumer.

Recommended: What Is the Starting Credit Score?

How Can You Check Your Credit Score?

Keep in mind that your credit score updates every 30 to 45 days, as new information comes rolling in from lenders. If you’re working on boosting your three-digit number, you may want to check on your progress every so often.

There are a few different ways that you can keep tabs on your credit score. You can sign up for a credit score monitoring service, which can provide regular credit score updates.

Another way is by using a spending app or credit card that provides access to your credit score as a feature or benefit. You may also have free access to it through your bank.

The Takeaway

FICO and Experian may be common names, but that’s where the similarities end. FICO is a widely used credit scoring model that creates a three-digit score based on reports provided by credit bureaus, including Experian. In addition to creating those detailed credit reports, Experian generates a credit score using data from FICO and another scoring model, VantageScore. Lenders may use both VantageScore and FICO when determining an individual’s creditworthiness.

Credit scoring models usually rely on a similar set of information, which means you can take the same actions to boost both scores. Making on-time payments, paying down what you owe, and diversifying your credit mix are all ways to help build up your credit score.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

Is Experian or FICO more reliable?

Your VantageScore and your FICO Score are two different credit scores that use two different credit models. Both are considered to be reliable. But lenders may prefer to use one model over the other, depending on which one best fits their needs.

Why is my FICO Score different on Experian?

Though it does not have its own credit scoring model, Experian generates a score using data from VantageScore and FICO. FICO, on the other hand, creates its score using only its own calculations.

How close is your FICO Score to your credit score?

People have multiple credit scores. Your FICO Score is just one of them. Most credit scores use a similar set of data, which means credit scores usually vary by only a few points. If you spot a large discrepancy between your scores, take a look at your credit report and dispute any errors or inaccuracies you see.

Which credit score is most accurate?

No one credit score is considered more accurate than the others. Rather, different credit scores may provide lenders with different insights on spending or borrowing habits.

What is a good FICO Score?

FICO Scores are generally divided into five different categories, from Poor to Exceptional. A “good” FICO Score falls between 670 and 739. Having a FICO Score that is Very Good (740 to 799) or Exceptional (800 to 850) is even better.

Why is my FICO Score higher than my credit score?

Your FICO Score is just one of many credit scores that you may have. It may be higher or lower than other credit scores depending on the calculations used, including how the information in your credit report was weighed. As long as your various scores are within a few points of each other, there is usually no cause for alarm.

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SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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The interest you’ll pay on a home equity line of credit (HELOC) is typically calculated by multiplying the daily interest rate by the average daily balance for the billing cycle. (This is called the average daily balance method.) The lower your daily balance, the less interest you’ll pay.

The variable nature of a HELOC interest rate is a big factor in this equation. Many HELOCs allow for interest rate adjustments once a month — so the amount of interest you pay varies from month to month, based on both your balance owed and your rate.

U.S. households had more than $396 billion in outstanding HELOC balances at last count, so plenty of homeowners are looking to minimize the amount of interest they pay. If you’re one of them, here’s a rundown of how interest is calculated on a home equity line of credit so you can take steps to minimize your costs whenever possible.

Basics of HELOC Interest Rates

To understand how does HELOC interest work and how much interest you’re being charged, it’s helpful to know the basics of how HELOC interest is calculated. Home equity line of credit interest rates are usually variable, so they can move up or down based on market conditions. Your monthly payment changes as a result. There is usually an interest rate ceiling and floor on a HELOC, which govern the highest and lowest the interest rate can go on your loan — so there are some controls built into this process.

How are HELOC rates calculated? The interest rate you pay is made up of two parts: the prime rate and a lender’s profit margin.

The lender’s margin stays the same throughout the life of your loan, but the prime rate can fluctuate based on market conditions.

HELOC Interest Calculation Methods

There are a few different ways your lender can calculate interest, though the average daily balance method is the one you’ll most likely see.

Average daily balance: An average daily balance calculation involves finding the average daily balance for the month and then multiplying it by the interest rate. This is the most common HELOC interest calculation method.

Adjusted balance method: The adjusted balance is where the lender subtracts any payments you made during the period to calculate interest charges from the “adjusted balance.”

Previous balance method: In this method, the lender uses the amount owed at the beginning of the period to calculate interest charges.

Recommended: What Is a HELOC?

Factors Affecting HELOC Interest Calculations

Several factors affect HELOC interest calculations. These include your annual percentage rate (APR), the extent to which you use your credit line, and whether you’re in the HELOC’s draw or repayment period.

APR

As mentioned previously, one of the defining characteristics of a HELOC is the variable APR, which can change over the course of the term. For many HELOC lenders, the interest rate can be adjusted once per month. But you still want to obtain the lowest possible interest rate at the outset of your line of credit.

Your personal qualifications and the attributes of your property and loan are the biggest factors in determining your APR. Some of these include:

•   Credit history: Your credit score and credit history factor into the interest rate your lender will offer you. A better credit score translates into a better interest rate on your loan.

•   Line amount: How large your HELOC credit line is will affect your interest rate.

•   Equity: Generally, the more equity you leave in your home, the better interest rate you’re eligible for.

•   Occupancy: An owner-occupied property typically gets a lower HELOC interest rate than an investment property, although some people do use HELOCs to fund investment properties because they think they can use a HELOC to build wealth.

Of course, it’s recommended to always shop around for a HELOC to ensure you find your best available rate.

Recommended: HELOC vs. Home Equity Loan

Credit Utilization

Lower charges on your HELOC create lower interest charges because with a HELOC, you only pay interest on what you borrow. A HELOC payment calculator can help you estimate what your monthly payment would be on your HELOC based on how much of the credit line you have used and your interest rate.

Draw vs. Repayment Period

With many HELOCs, there is a draw period and a repayment period. The draw period is where your minimum payment covers the interest charged on the loan. The repayment period is where you pay principal and interest in installment payments.

When it comes to the interest charges during the draw vs. the repayment period, the calculation is the same, but the interest rate may be different. The main difference is the principal doesn’t go down if you’re making interest-only payments during the draw period. Some borrowers may also have a fixed interest rate when they enter the repayment period.

Sample HELOC Interest Calculations

It’s helpful to look at the process of calculating HELOC interest rates and see a couple examples to understand how it works. Here’s a complete breakdown of the most common method for calculating HELOC interest, the average daily balance. Yes, it’s a lot of math — but if you have a HELOC, your lender runs the numbers for you and sends you a monthly bill.

Step 1: Find the Average Daily Balance

Add each day’s balance together, then divide by the number of days in the billing cycle.

Example 1: You have a $10,000 balance for each of the 30 days of the billing cycle.
Average daily balance = ($10,000 X 30 days) / 30 days
Average daily balance = $10,000

Example 2: You have a $10,000 balance for two days into the billing cycle and then pay it off. Average daily balance = ($10,000 + $10,000) / 30 days
Average daily balance = ($20,000) / 30 days
Average daily balance = $666.67

Step 2: Find the Daily Periodic Rate of Your HELOC

To find the daily periodic rate of your HELOC, divide the APR on your statement by 365.

Example: Your APR is 9.49%
Daily periodic rate = 9.49%/365
Daily periodic rate = .026%

Step 3: Find the Daily Interest Charge

You’ll find the daily interest charge by multiplying the average daily balance by the daily periodic rate.

Example 1: $10,000 average daily balance with a .026% daily periodic rate.
Daily interest charge = $10,000 X .026%
Daily interest charge = $2.60

Example 2: $666.67 average daily balance with a .026% daily periodic rate.
Daily interest charge = $666.67 X .026%
Daily interest charge = $.17

Step 4: Find the Total Interest Charges for the Billing Cycle

Multiply the daily interest charge by the number of days in the billing cycle. For this example, we’ll use 30.

Example 1: $10,000 average daily balance
Total interest charges = $2.60 X 30
Total interest charges = $78

Example 2: $667.67 average daily balance
Total interest charges = $.17 X 30
Total interest charges = $5.10

In this side-by-side comparison, the borrower who paid off the balance after two days saved over $70 in interest costs for the month.

Strategies to Minimize HELOC Interest Costs

Paying less interest is a smart move if you can swing it. If you need to use your HELOC to finance a large expense, keep these tips in mind to help you save on interest.

Make purchases toward the end of the billing cycle. With the daily balance interest calculation, you want to minimize the number of days you’re paying interest on a purchase. If possible, make purchases with your HELOC toward the end of your billing cycle and make payments shortly thereafter.

Pay earlier in the billing cycle. Since the interest is calculated daily based on the money you still owe, paying it earlier in the billing cycle can reduce the amount of interest you’ll pay. And if you can pay down the principal (as in example 2, above), even better.

Make extra payments. Extra payments reduce the principal, which reduces how much interest you’ll pay.

Convert to a fixed-rate loan. Converting your HELOC into a fixed-rate loan could lower your interest costs if you can lock in a lower interest rate. And even if you can’t, converting to a fixed rate protects you from further rate increases and ensures you have a predictable payment amount from month to month going forward.

Recommended: How HELOCs Affect Your Taxes

Comparing HELOC Interest to Other Borrowing Options

Here’s how a HELOC stacks up against home equity loans, personal loans, and credit cards.

Home Equity Loan

This is a different type of home equity loan that offers a fixed interest rate. Like a HELOC, it uses your home’s equity as collateral, but unlike a HELOC, with a home equity loan you receive your funds in a lump sum upfront and start repaying the principal, plus interest, immediately.

If you’re comparing interest rates on a HELOC vs. home equity loan, you’ll typically see lower interest rates in HELOCs initially, but over the years, a HELOC can adjust many times, whereas a home equity loan will always have the same interest rate.

Personal Loan

A personal loan usually has a higher interest rate than either HELOCs or home equity loans. However, your home isn’t used as collateral on the loan, which is a big upside. In early 2025, the average interest rate for personal loans was over 12%.

Credit Cards

Credit cards have significantly higher interest rates than either HELOCs or personal loans. Average credit card interest rates in early 2025 are over 21%. They’re very flexible, but shouldn’t be relied on as a lending tool because of the high interest rates.

The Takeaway

Paying less interest on your HELOC is a smart move for your finances. If you know how is a home equity line of credit interest calculated, you’ll understand how much you’re paying for borrowing money on a HELOC and use smart strategies to pay less. You might also give yourself a head start by paying more than the interest-only payment during the draw period, so that by the time you enter the repayment period, you’ve chipped away at your balance and lowered your payment amount.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

FAQ

How often does a HELOC interest rate change?

HELOCs are typically variable-rate loans, and while it’s up to the lender to determine how often they change, the rate can change each month. Some HELOCs offer the option to lock in a certain amount borrowed, and the portion you’ve locked becomes a fixed-rate loan with a repayment schedule.

Can I deduct HELOC interest on my taxes?

There are a few scenarios where you can deduct HELOC interest on your taxes. If you use the funds to buy, build, or improve your residence, the interest is tax deductible. However, you would need to itemize your deductions, so consult with a tax advisor. This deduction may change after the 2025 tax year — another good reason to speak with an advisor.

What’s the difference between simple and compound interest for HELOCs?

The daily balance method used by HELOCs is considered simple interest. Compound interest is where interest is charged on top of interest, which isn’t a common way of computing interest for HELOCs. All of the specifics about your HELOC — including your interest rate, how often the variable rate may change, and your rate floor and ceiling, among other things — should be spelled out in your HELOC agreement.

Photo credit: iStock/Prostock-Studio

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SOHL-Q125-077

A home equity line of credit (HELOC) offers flexible access to funds, using your home as collateral. You might use a HELOC to cover home improvements, large planned expenses, or financial emergencies. But how long does it take to get a HELOC?

The typical HELOC processing time is usually anywhere from two to six weeks, though every borrower’s situation is different. If you’re interested in a HELOC, it’s helpful to know what kind of timing you can expect.

Understanding the HELOC Application Timeline

First, what is a home equity line of credit? A HELOC is a line of credit that’s secured by your home; that’s the standard HELOC definition.

Applying for a HELOC is a multi-step process, and some stages may take longer than others. Here’s an estimate of how long to get a HELOC from start to finish.

•   Research (1-3 hours). Before you apply for a HELOC, it’s helpful to spend some time comparing mortgage rates and terms from different lenders. Looking at three lenders at least can give you an idea of typical HELOC rates for people with your credit scores. You can also use a HELOC repayment calculator to estimate your monthly payments. Note: If you have an FHA loan, your current lender may not offer a HELOC, but you can get one through another lender.

•   Preapproval (<10 minutes). Mortgage preapproval means a lender performs a soft credit check to conditionally approve you for a HELOC. Preapproval doesn’t guarantee that you’ll get a home equity line of credit.

•   Application (<15 minutes). Many HELOC lenders offer online applications which may take just a few minutes to complete. Some offer initial approval in minutes.

•   Submit documents (<30 minutes). Your lender will likely ask for supporting documentation to go with your application. You may upload them when you submit your application or later on. If you don’t have financial details such as your current mortgage statement, latest tax filing, or pay stubs easily at hand, you’ll need to budget another hour or two to pull your documents together.

•   Appraisal (1 to 2 weeks). Your lender will need an appraisal to know what your home is worth. The appraisal itself should only take a few hours, but you might be waiting a couple weeks for the appraiser to finalize the report and submit it to the lender.

•   Underwriting (2 to 4 weeks). During underwriting, the lender reviews your financial details, the appraisal report, and information about your home to finalize your loan.

•   Closing (1 to 2 hours). If all goes well with underwriting, your lender will schedule a closing date. You’ll sign all the required paperwork, either online or in person, and pay your closing costs.

•   Funding (1 to 14 days). After closing, your lender will make your HELOC available to you. You may get a debit card, ATM card, or paper checks, which can take a couple of weeks to arrive by mail.

This isn’t an exact timeline, but it’s designed to give you an idea of how quickly each phase of the process may move.

Factors Influencing HELOC Approval Time

How long does it take to get a HELOC approved once you’ve submitted your application? You’ll usually need to wait a few weeks, though it may be a shorter or longer wait, depending on your situation and the lender you’re working with.

Lender’s Processing Speed

Every lender is different with regard to processing speeds, and it’s important to understand how lenders measure them. For example, a lender may tell you that you can get approved in five minutes but you’ll still need to go through income and credit verification, which takes time.

How long does a HELOC take at a traditional bank vs. an online lender? It depends, but traditional banks can sometimes move slower than online lenders if their process is more involved. Some online lenders guarantee funding access within five business days after closing.

Documentation Preparedness

The documents you’ll need to apply for a HELOC are the same documents your lender asked for when you bought the home. The list of documents you’ll need includes:

•   Pay stubs

•   W-2s

•   Tax returns

•   Bank account and/or investment account statements

•   Profit and loss statements and cash flow statements (if you’re self-employed)

How long it takes you to get these documents together ultimately hinges on your organizational skills. If you’ve got your documents prepared in advance, you won’t have to go hunting for them when you apply, which could slow the process down.

Property Appraisal

Lenders use an appraisal to estimate what your home is worth. That’s a requirement for any home loan. This is a nonnegotiable step for a HELOC, and how long it takes depends on your lender’s policies.

Some lenders offer what’s called a desktop appraisal, which is completed using property valuation software. An appraiser (or the lender) uses the software to pull data from public records and tax records to calculate an approximate value for the home.

Other lenders may require an in-person appraisal, which involves someone visiting your home to take pictures and measurements. A hybrid approach combines an in-person visit with valuation software. It may take a week for the appraisal to happen, and then you may be waiting another week or two for the appraisal report.

What if the appraisal comes in under your valuation expectations — how long does a home equity line of credit take then? There’s no set answer, since what happens next is usually up to you. You could ask the lender to reconsider the appraisal, or get a second opinion, which would involve scheduling another appraisal. Either option could add days or weeks to your HELOC timeline.

Underwriting Process

Underwriting is usually the most time-consuming step in the HELOC application process. This is when the lender will:

•   Review your application

•   Perform a credit check

•   Verify your income and employment

•   Review the appraisal report

•   Calculate your loan-to-value (LTV) ratio, which measures how much equity you have in your home

•   Calculate your debt-to-income (DTI) ratio, which measures how much of your monthly income goes to cover debt

•   Perform a title search to see if there are any liens or legal claims against the property

•   Request additional documentation from you or ask for clarification about information you’ve provided

•   Draw up the final loan documents and schedule a closing date

How long does it take to get HELOC approval once you reach this stage? If there are no issues with your application and the home appraises the way you expect it to, underwriting can move fairly quickly. Some lenders may be able to get you to a closing in as little as two weeks.

Steps to Expedite Your HELOC Application

If you need access to HELOC funds sooner rather than later, there are some things you can do to try and speed up the process. These tips can help you avoid snags that could eat up more time.

Gather Necessary Documentation in Advance

A little preparation can go a long way where your documents are concerned. Rounding up all of the documents the lender needs to process your application beforehand means you don’t have to waste time tracking them down later.

Check the lender’s requirements to see exactly what you’ll need before you start your application.

•   Ask your employer for copies of your pay stubs if you don’t have them.

•   Download a transcript of your most recent tax return from the IRS.

•   Download your bank statements and/or investment account statements from your bank or brokerage.

•   Use a spreadsheet to create a simple profit and loss statement if you’re self-employed.

Each of these tasks may take a little time, but once you’ve got it all together, you should be set for a smooth application experience. Read our detailed HELOC guide to learn more about how HELOCs work so you’re fully prepared.

Choose a Responsive Lender

One thing that can slow a HELOC application down every time is a lender that drags its feet. You can avoid that situation by researching lenders to see how quickly they return approval decisions, complete underwriting, and fund a HELOC once it’s approved.

Also, consider how responsive the lender is if you have questions. For instance, do you have multiple ways to contact the lender? Does it offer 24/7 phone or chat support? How long does it take a lender to get back to you if you have to leave a message?

All of those things can make a difference when it comes to how long it takes to get a HELOC.

Ensure Property Readiness for Appraisal

If your lender requires an in-person appraisal, make sure your home is ready in advance. You can do that by:

•   Cleaning and clearing away clutter

•   Touching up paint and tackling minor repairs if necessary

•   Sprucing up your curb appeal

It’s also helpful to make a list of all repairs or improvements you’ve made since you bought the home. If you’ve replaced your HVAC system or roof, for instance, that could have a significant impact on your home’s appraisal value.

The Takeaway

How long does it take to get a HELOC? In a perfect world, it’s a speedy process — but the reality is that HELOCs usually take at least a few weeks. If you know you’ll need a HELOC for future expenses, it’s important to get an early start on planning so you don’t have a long wait once you apply.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

FAQ

What is the average time frame to get a HELOC?

An average time frame to get a HELOC is usually anywhere from two to six weeks. The actual timing will largely depend on your lender and whether any issues arrive during underwriting that could push back your closing date.

Can I speed up the HELOC approval process?

You can’t force a lender to move faster, but you can save time on your end by organizing your documents beforehand and making sure your home is appraisal-ready. Choosing a lender that offers fast approval and rapid funding can also make a difference.

Does the property appraisal affect the HELOC timeline?

The property appraisal affects your HELOC timeline, since you have to wait for it to be completed, then wait for the lender to receive the final appraisal report. If the lender uses a desk appraisal (where no in-person visit is needed), it may go a little faster. An in-person appraisal, on the other hand, could take one to two weeks to complete.

What documents are typically required for a HELOC application?

Lenders usually ask for documents that show proof of income and assets. So you may need to provide copies of recent pay stubs, W-2s, tax returns, and bank statements. If you’re self-employed, you can substitute a profit and loss statement and cash flow statement for W-2s.

Does my credit score impact the HELOC approval time?

A good credit score could potentially help you get approved for a HELOC faster, though the lender will still need to verify your income and review the appraisal. “Good” credit is a FICO® score ranging from 670 to 739.

Photo credit: iStock/miniseries

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL-Q125-071

A home equity loan, or HELOC, is a revolving line of credit that’s secured by your home. You can use a HELOC to access the equity you have in your home, which is the difference between what you owe on your home and what it’s worth.

It’s possible to get a HELOC on an investment property if you meet a lender’s requirements. There are both pros and cons to using a home equity line of credit on an investment property, which is important to understand before moving forward.

Understanding HELOCs for Investment Properties

An investment property HELOC is a home equity line of credit that’s secured by an investment property that generates income. This might be a home that you exclusively rent out full-time or one that you rent seasonally.

Typically, when someone gets a HELOC, they borrow against their primary residence (the home they live in). Your home secures the HELOC, and the amount you can borrow is based on your credit scores and the amount of equity you have.

An investment property equity line of credit works much the same way, but the difference is that it’s tied to your rental home. You might tap into your investment property equity using a HELOC to:

•   Fund renovations or repairs on the property

•   Consolidate high-interest debts

•   Pay for a large expense

•   Cover a financial emergency

Investment property HELOCs, like HELOCs generally, have a draw period of 5 to 10 years, in which you can access your credit line. This is followed by a repayment period that may last 5 to 25 years.

Recommended: HELOC Definition

Eligibility Criteria for Investment Property HELOCs

Qualifying for a HELOC on a primary residence usually isn’t that different from getting a home loan to buy property. Getting a HELOC for investment property, however, may entail jumping through a few additional hoops.

Equity Requirements

The first requirement for a home equity loan or HELOC on investment property is equity. (Again, equity is the difference between what you owe on the home and what it’s worth.) Lenders use something called the loan-to-value (LTV) ratio to measure your home equity. Your LTV ratio is the amount you’re financing compared to what your home is worth.

Typically, lenders look for an LTV ratio of 85% to 90% if you’re getting a HELOC on a primary residence. So you’d need 10% to 15% equity to qualify.

The required LTV for a HELOC on investment properties, on the other hand, might be 75% or 80% instead. Essentially, you’d need more equity to qualify.

Why? Because it’s a riskier loan for the lender. If you were to experience financial hardship, you would likely want to preserve the home you live in and would prioritize payments on that mortgage above those on your investment property.

A HELOC on rental property, like any HELOC, is a junior lien — which means that it takes a backseat to first mortgage liens for repayment. So if you did lose your investment property to foreclosure, your first mortgage on the property would get paid off from the proceeds of the sale before a HELOC lender would be paid. Read our detailed HELOC loan guide to learn more about this borrowing option.

Credit Score Standards

A credit check is typical for a home equity line of credit. For most mortgages, including HELOCs, lenders look for a FICO® credit score of 620 or higher. (FHA loans accept borrowers with scores as low as 500.)

Credit score requirements may be higher for HELOCs, however, since there’s more risk for the lender. So you may need a score of 670 or better to qualify. That’s a “good” credit score, according to FICO.

If your credit could use some improvement, focus on paying bills on time and reducing your overall debt levels. You could also improve your credit utilization by requesting higher limits for your credit cards. Just don’t run up more debt against your new limit.

Property Type and Condition

Aside from your finances, lenders also scrutinize the property when deciding whether to approve a HELOC on an investment property. An in-person appraisal may be required to assess its condition and make sure that it’s an eligible property type.

Since the home secures your HELOC, the lender will want to make sure that it’s accurately valued and in good shape. The lender may also ask questions about your tenants and leasing agreement to assess how consistent your rental income is.

Pros and Cons of Using a HELOC on an Investment Property

Should you get a HELOC for an investment property? There are some compelling reasons to consider it, but there are downsides as well. It’s important to weigh both sides before making a decision.

Advantages

Here’s what a HELOC on a rental property has to offer, in terms of benefits.

•   Convenience. A HELOC offers flexible access to cash for home improvements, emergencies, or any other reason.

•   Low rates. HELOCs may be less expensive than other borrowing options, such as personal loans or credit cards.

•   Possible tax deduction. You can deduct the interest you pay if you’re using a HELOC exclusively to renovate or repair your investment property.8 This rule may change after the 2025 tax year; consult a tax advisor about all deductions.

•   Lower payments initially. You may only have to make interest payments in the draw period.

•   Less risk. If you experience a significant financial setback and default on the line of credit, at least you aren’t risking your primary residence.

Disadvantages

Getting a HELOC on investment property isn’t always the right move. Here are some downsides of an equity line on investment property to consider.

•   Difficult to qualify. Not all lenders offer HELOCs for rental properties and it may be challenging to find one that will approve you.

•   Unpredictability. If you have a variable-rate HELOC, your interest rate is subject to change, which could make your payments less affordable if rates rise.

•   Cost. Lenders may charge higher interest rates or higher fees for HELOCs on investment property, adding to your overall cost.

•   Shrinking equity. Taking out a HELOC reduces your available equity, which could put you at risk of becoming upside down if home values decline.

•   Less flexibility. Any balance owed on a HELOC often needs to be paid when you sell the house. This might affect how quickly you can sell your investment property should you wish to do so.

Alternative Financing Options

A HELOC isn’t the only way to get cash when you need it. You might consider other possibilities, including:

•   HELOC on your primary home. If you can’t get a HELOC on an investment property, you may still qualify for one on the home you live in. Shopping around to compare mortgage rates can help you see what you might qualify for.

•   Personal loans. Personal loans let you borrow a lump sum of money, and unlike a HELOC, they aren’t tied to your home.

•   Credit cards. Credit cards could be a good alternative to a HELOC if your card has a low rate or you’re earning generous rewards when you spend. For instance, you might use a card that earns cash back at home improvement stores to save money on remodeling projects.

•   Cash-out refi. A cash-out refinance replaces your existing mortgage loan with a new one. You take your equity out in cash at closing. This could be a simpler way to get access to funds and potentially lower your rate and/or monthly payments.

Recommended: Mortgage Preapproval

Steps to Obtain a HELOC on an Investment Property

Getting a HELOC on a rental property takes some planning. Here’s what you’ll need to do.

Assess Your Financial Situation

First, look at where you are financially. Consider your:

•   Credit scores

•   Income

•   Existing debt (including mortgage payments for your primary residence, rental property, and credit cards)

•   Budget and expenses

•   Home equity

•   Borrowing needs

You can use a home equity calculator to gauge whether you have the right LTV required to get a HELOC on an investment home. A HELOC repayment calculator can help you estimate how much of your budget might go to payments. If you haven’t checked your credit, you can pull your reports for free through AnnualCreditReport.com or with free credit monitoring.

Prepare Necessary Documentation

If you think a HELOC is the right move, the next step is organizing your documents. Generally, you’ll need to have copies of your:

•   Pay stubs

•   W-2s

•   Tax returns for the most recent year

•   Bank account statements

If you’re self-employed, your lender might ask for a profit and loss statement and cash flow statement. You may also need to provide two years’ worth of tax and income statements versus one.

Submit Your Application

Assuming you’ve chosen a lender, the next step is applying. If you’re applying for a HELOC online, you should be able to upload any supporting documentation the lender requests.

As you go through the application, complete all required fields and double-check for accuracy. Once you submit your application, the lender will take the next steps which are checking your credit and scheduling an appraisal.

You’ll need to pay the appraisal fee, along with any other closing costs. The appraisal fee is usually due upfront, while other fees can be paid on closing.

The Takeaway

Getting a HELOC on an investment property can unlock extra cash, but it may not be suitable for every situation. Before you move forward with a home equity line of credit, it’s important to know what you can expect and how a HELOC tied to an investment property is different from one tied to your primary home.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

FAQ

What are the typical interest rates for HELOCs on investment properties?

HELOCs on investment properties tend to have higher interest rates than HELOCs on primary residences, or mortgages used to buy a home. You may pay several percentage points more to borrow, and it’s entirely possible to see double-digit HELOC rates.

Are there tax implications when using a HELOC on an investment property?

You might be able to deduct the interest you pay on a HELOC for your rental property if you’re using the money for repairs or improvements. You’ll need to consult a tax advisor, however, and be mindful that this rule may change after the 2025 tax year.

How does a HELOC on an investment property affect my credit score?

HELOCs show up on a credit report. When you apply for a HELOC, it adds an inquiry to your report, which can knock a few points off your score. As long as you pay your HELOC on time, however, you can get those points back.

Can I use a HELOC from my primary residence to fund an investment property?

You can use a HELOC from your primary residence to fund an investment property, but it isn’t always easy. Lenders may be more stringent with credit, income, and equity requirements when you borrow against your primary home to buy a rental home.

What are the risks associated with taking a HELOC on an investment property?

The primary risk associated with getting a HELOC on an investment property is losing the home to foreclosure. If you can’t manage the added debt load or your rental income dries up, you could risk the loss of the property if the bank takes it back.

Photo credit: iStock/gorodenkoff

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL-Q125-070