HELOC Payment Haziness

Question

I have been searching, reading, and watching youtube trying to understand HELOC. Everyone explains simple vs compound interest, daily average balance, and that money can go in and out at any time. However, those pieces of knowledge are not enough to really understand what a HELOC principal amount would be in any real life scenario.

Say I have an HELOC with a balance of $10k and 5.5% interest. Over two months, I make a payment on the 5th and 20th of $1500 all four times. On the 23rd of the first month I spend $500 out of the HELOC and on the 13th of the second month I spend $1000. How can I figure out at the end of the second month what my principal will be? When is interested calculated and 'billed' to me?

Answer 1

Most HELOC work on daily reducing balance and interest due on the month end. So your calculation should look like below. Note some banks may use a slight variation, i.e. interest or payments are effected from next day.

01-May-18 to 04-May-18 Principal 10000 Int 6.02739726
05-May-18 to 05-May-18 Payment -1500 Reduce Principal
05-May-18 to 19-May-18 Principal 8500 Int 19.21232877
20-May-18 to 20-May-18 Payment -1500 Reduce Principal
20-May-18 to 22-May-18 Principal 7000 Int 3.164383562
23-May-18 to 23-May-18 Withdrawal 500 Increase Principal
23-May-18 to 31-May-18 Principal 7500 Int 10.17123288
01-Jun-18 to 01-Jun-18 Int 38.57534247 Add Interest for Month
01-Jun-18 to 04-Jun-18 Principal 7538.575342 Int 4.543798837
05-Jun-18 to 05-Jun-18 Payment -1500 Reduce Principal
05-Jun-18 to 12-Jun-18 Principal 6038.575342 int 7.279378495
13-Jun-18 to 13-Jun-18 Withdrawal 1000 Increase Principal
13-Jun-18 to 19-Jun-18 Principal 7038.575342 Int 7.424250704
20-Jun-18 to 20-Jun-18 Payment 1500 Reduce Principal
20-Jun-18 to 30-Jun-18 Principal 8538.575342 Int 14.15298105
01-Jul-18 to 01-Jul-18 Int 33.40040908 Add Interest for Month
01-Jul-18 to 01-Jul-18 Principal 8571.975752