Rates on these popular HELOCs dipped slightly. Should you take one out?

Home equity line of credit (HELOC) rates for loans with a 20-year repayment period saw a slight decrease to 7.80%, down from 7.84% the week prior, according to Bankrate data from the week ending February 6. Meanwhile, HELOCs with a 10-year repayment period rose to 7.56%, up from 7.39% the week prior, and 30-year HELOCs remained at 6.79% for the fifth straight week.  See some of the best HELOC rates you may get now here.

Homeowners with significant equity in their homes can benefit from a HELOC, as it can provide cash at rates lower than they might find with a personal loan or a credit card. “If you own a home that has appreciated to have your owning over 20% of the value, you may benefit from opening a HELOC,” says certified financial planner Autumn Campbell at Facet Wealth. Borrowers often use HELOCs to fund major expenses like home renovations or debt consolidation. See some of the best HELOC rates you may get now here.

But, before taking one out, there are a few things to consider: HELOCs aren’t risk-free, and defaulting on one can have serious consequences, like losing your home. You may not qualify for as much as you’d think, as this depends on the amount of equity they have in their home. Plus, most HELOCs come with a variable rate. “As time goes on, your rate and your monthly payment may change even if you’re withdrawing the same amount of money every month,” Jacob Channel, senior economic analyst at LendingTree, recently told MarketWatch Picks.

You also need to understand how HELOCs work. They are composed of a two-part structure, typically a 10-year draw period and a 20-year repayment period that together equal a 30-year term. During the draw period, a borrower can draw upon any amount of the money available to them, but once the draw period ends and the repayment period begins, money can no longer be withdrawn and the borrower must begin to pay back the principal in addition to interest. For anyone who finds themself in a tough financial position when full repayment is due, the total monthly payment of interest plus principal can be a steep hill to climb.

To get the best rates on HELOCs will require you to have a good or excellent credit score, low debt-to-income (DTI) ratio and substantial equity in your home. To calculate your DTI, add up your monthly costs including your mortgage payment, credit card, child support, insurance, other debts, etc. and divide the total by your gross monthly income. You also should shop around for HELOCs with the best rates and terms. See some of the best HELOC rates you may get now here.