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Traditional HELOC vs. Bank Statement HELOC: Which is Right for You?

February 05, 20243 min read

When it comes to leveraging the equity in your home, a Home Equity Line of Credit (HELOC) offers a flexible and efficient way to access funds. However, not all HELOC programs are created equal. The traditional HELOC and the Bank Statement HELOC serve different borrower needs and financial situations. Understanding the nuances between these two can help you decide which option aligns best with your financial goals.

Traditional HELOC: The Standard Approach

A traditional HELOC is what most homeowners are familiar with. It offers a revolving line of credit based on the equity in your home, much like a credit card but with your home as collateral. Here’s what makes the traditional HELOC stand out:

Key Features:

  • Credit and Income Verification: Applicants must provide proof of income, usually through W-2 forms or tax returns, and undergo a credit check.

  • Equity Requirements: You'll need significant equity in your home to qualify, typically between 15-20%.

  • Variable Interest Rates: Rates often vary with market conditions, which can affect monthly payments.


  • Flexibility: Borrowers can draw from the line as needed during the draw period.

  • Lower Interest Rates: Generally offers lower rates compared to credit cards and personal loans.


  • Stringent Qualification Criteria: Requires a good credit score and verifiable income.

  • Fluctuating Payments: Variable rates mean payment amounts can change over time.

Traditional HELOC

Bank Statement HELOC: An Alternative for the Self-Employed

The Bank Statement HELOC program is designed for individuals who may not have traditional forms of income verification, such as self-employed professionals, freelancers, or business owners. This program assesses financial stability and income differently.

Key Features:

  • Income Verification via Bank Statements: Instead of W-2s or tax returns, applicants can use 12-24 months of bank statements to demonstrate income.

  • Designed for Self-Employed: Tailored to those with non-traditional income streams.

  • Flexible Equity and Credit Requirements: May offer more leniency on credit scores and home equity compared to traditional HELOCs.


  • Accessibility: Makes credit accessible to those without traditional employment.

  • Competitive Rates: Offers rates that are competitive with traditional HELOCs, depending on the lender.


  • Potentially Higher Interest Rates: Depending on the lender and the borrower's financial profile, rates may be higher than those of traditional HELOCs.

  • Documentation: Requires thorough documentation of bank statements, which can be cumbersome.

Bank Statement HELOC

Choosing the Right Program

Deciding between a traditional HELOC and a Bank Statement HELOC comes down to your employment status, how you can verify income, and your financial goals. If you have a steady, verifiable income and meet the credit criteria, a traditional HELOC might suit your needs with its potentially lower interest rates. On the other hand, if you're self-employed and find it challenging to prove your income through traditional means, a Bank Statement HELOC could provide the financial flexibility you need without the conventional paperwork.


Both the traditional HELOC and the Bank Statement HELOC offer valuable opportunities to tap into your home equity for various financial needs. By understanding the key differences and evaluating your unique financial situation, you can choose the program that best supports your goals.

Interested in exploring HELOC options? Contact Financial Suit today to discuss the best solution for your financial needs and start your application process. Whether you're traditionally employed or navigating the world of self-employment, we're here to help you unlock the potential of your home equity.

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