HELOC: Home Equity Line of Credit FAQ

A HELOC, or a home equity line of credit, is set up to have a maximum draw limit rather than just a set dollar amount in the form of a lump sum like a home equity loan. Similar to a home equity loan, a home equity line uses your home as security. This line of credit is set up to a certain amount decided between you and your lender (generally 80% of the market value on the home in question minus any fees currently owed upon it) that can be drawn out in a set amount of time. A HELOC, in simple terms, is a recommended alternative to a home equity loan for those with ongoing projects.

So, you are in desperate need of cash, got projects to fund, mouths to feed, bills to pay, and so you decide to drop by the bank and get a loan. First option you are presented with when offering your home as collateral is whether to go with a home equity loan or a HELOC, or simply a home equity line. While you can find a summary of the home equity loan [link]here[link], in most cases a HELOC will probably be your better choice, simply because when you need the cash, you have it, and when you don't, don't worry about it. Sounds simple enough, and for those in need, a HELOC is a welcome alternative to many other loan choices because you won't have a lot of money just sitting around that you have to pay interest on.