No emergency fund? You may currently own the safety net you need.

For Americans facing economic uncertainty, building an emergency fund might be more accessible than they think, potentially by leveraging existing home equity. With inflation rising and wages lagging, having a financial cushion is crucial, but saving can be challenging.

Homeowners in the U.S. currently hold record levels of equity, presenting an opportunity to tap into this resource. Two primary methods are home equity loans and home equity lines of credit (HELOCs).

Home equity loans offer a lump sum with an average interest rate of 6.98%, making it a cost-effective borrowing option. This lump sum can directly serve as an emergency fund. However, borrowers must begin repayments immediately and should only withdraw the necessary amount, as their home serves as collateral.

HELOCs function similarly but provide access to equity as a revolving line of credit. This can be advantageous as repayment is only required for the funds that are actually used. This flexibility makes HELOCs a potentially better option for those unsure of their exact emergency fund needs.