Home equity lines of credit (HELOC) are somewhat like a standard home equity loan; however, you do not receive a lump sum payment. Instead, you have a line of credit for the total amount of the loan available at the bank handling your HELOC. This line of credit is accessible via bank issued checks, and some banks may even offer a debit card. You will only need to make monthly payments on the portion of your HELOC you have used. The remaining line of credit remains available, accessible, and you will not pay interest on it if you have not used it. Interest rates on home equity lines of credit are much more reasonable than credit card rates, and interest on a HELOC is tax deductible. Read the terms of your home equity line of credit carefully, and be certain that you are aware of interest rates, payment schedules, and any balloon payments that may exist. As with any line of credit, use as little as you can, pay it off promptly, and keep financial responsibility in mind at all times.

HELOCs are ideal for homeowners planning substantial projects around the home. Remodeling a kitchen, finishing a basement, or landscaping a yard may all involve variable costs, and a HELOC allows you to use only what you require. Think carefully about the final value of any renovations you plan. If you expect to sell your home, be certain that any improvements or changes you make will add to your home's overall value. Accessibility features as you age and needs change, updating a home to make it more comfortable or restructuring a family home for empty nesters are all good uses for your home equity line of credit. Some forethought will ensure that your HELOC is well spent, and a good investment for your financial future.

As with any loan, take the time first to check your own credit report. Improving your credit will improve the rates available for your home equity line of credit. Shop around at your own bank and other lenders to find the best loan terms you can. A HELOC is a long-term proposition, and selecting a reputable lender is critical.

It is critical to remember that your home secures your home equity line of credit. If you cannot reasonably afford to take on this debt, do not do so. Avoid counting on future funds, and look carefully at your budget, your extant debt and your overall financial picture. While a HELOC can be a great choice for home improvements, renovations, or other projects, if you use it unwisely, you can find yourself in a worrisome position. Your home is more than just a financial asset, and losing it is a serious concern. Used responsibly, a home equity line of credit is a fine option for many homeowners.