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What is the difference between a fixed rate and variable rate for my HELOC?

A HELOC through Prosper has a variable rate, meaning the interest you pay could increase or decrease. Changes to this rate are calculated by adding the margin identified in your credit agreement to the current prime rate (https://www.wsj.com/market-data/bonds). 

 

During the draw period, you can make interest-only monthly payments with a minimum payment of $75. Paying more than the interest you owe will enable you to borrow additional money during the draw period. If you prefer a fixed rate option, during your draw period you can choose to “lock in” your rate up to three times. 

 

During the repayment period you'll pay down what you owe by making a monthly payment calculated using the interest rate in effect at the start of your repayment period. When rates decrease, less interest is due, so more of your monthly payment repays the principal balance. When rates increase, more interest is due, so less of your monthly payment repays the principal balance. In this case, you may need to make a single “balloon” payment to cover your unpaid balance in full at the end of your repayment period. For Texas HELOCS, different rules apply: if the interest rate increases during your repayment period, then your monthly payment will also increase in order to repay your balance by the end of the repayment period. 

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