cbsnews.com
Using HELOCs to Combat Inflation: Strategies, Advantages, and Risks
In response to a slight uptick in inflation in January 2025, financial experts recommend using HELOCs to consolidate high-interest debt, finance home renovations, and avoid tapping retirement savings; however, variable interest rates and the risk of losing one's home present potential drawbacks.
- What are the primary financial strategies experts suggest for using HELOCs to mitigate the impact of inflation?
- Americans faced lower inflation in the past year compared to previous years, but January 2025 saw a slight uptick. Home equity lines of credit (HELOCs) offer a way to combat inflation, particularly for consolidating high-interest debt, home renovations, or avoiding retirement account withdrawals.
- What long-term financial implications and potential risks should consumers consider before using a HELOC to manage inflation?
- Using HELOCs strategically can improve credit scores by reducing high-interest debt, potentially offering long-term financial health benefits. However, risks exist; variable interest rates can increase payments, and using a HELOC for unnecessary spending without a repayment plan could jeopardize homeownership. Borrowers should carefully assess their financial stability before utilizing a HELOC.
- How do the advantages of HELOCs, like flexible payment options and lower interest rates, compare to other debt consolidation or borrowing methods?
- Financial experts recommend three key HELOC strategies to fight inflation: consolidating high-interest credit card debt (average credit card rate exceeds 21%, while HELOCs average around 8%), financing home renovations to preempt rising material and labor costs, and avoiding retirement account withdrawals. These strategies offer financial flexibility and protection during inflationary periods.
Cognitive Concepts
Framing Bias
The article's framing strongly promotes HELOCs as a solution to inflation. The headline and introduction immediately highlight HELOCs as a key strategy, and the article consistently emphasizes their benefits. While expert opinions are included, the overall narrative structure and emphasis favor a positive view of HELOCs, potentially overshadowing potential drawbacks.
Language Bias
The language used is generally neutral, but some phrases lean towards a positive portrayal of HELOCs. For example, describing them as a "shield against inflation" or "smart choice" adds a positive connotation. More neutral alternatives could be used, such as "financial tool" or "option."
Bias by Omission
The article focuses heavily on using HELOCs to combat inflation, but omits discussion of alternative financial strategies, such as budgeting, reducing expenses, or seeking government assistance programs. This omission might lead readers to believe that a HELOC is the only or best solution for managing inflation, which isn't necessarily true. The article also doesn't discuss the potential downsides of HELOCs in detail, such as the risk of foreclosure if payments are missed.
False Dichotomy
The article presents a false dichotomy by framing HELOCs as the primary solution to combatting inflation. While it acknowledges that HELOCs aren't suitable for everyone, it doesn't adequately explore other viable financial strategies for managing inflation.
Sustainable Development Goals
Using HELOCs to consolidate high-interest debt can help reduce the financial burden on individuals, contributing to reduced inequality. Lower interest rates and manageable monthly payments make it easier for people to manage their finances, preventing them from falling further behind due to inflation. The article highlights that improved credit scores resulting from debt consolidation can also lead to better financial health in the long run.