Home equity line of credit (redirected from HELOC)

Home equity line of credit (HELOC). Sometimes referred to as a HELOC, a home equity line of credit lets you borrow against the equity you've built in your home, usually by using a debit card or writing checks against your available balance.

Your credit line, or limit, is fixed, but you can draw against it up to that limit rather than receive the entire loan amount as a lump sum. Whatever you borrow reduces your available balance until you repay it. Then you can borrow it again.

Home equity lines of credit have variable interest rates. The terms of repayment vary and are spelled out in your agreement.

In some cases, you begin to repay principal and interest as soon as you borrow. In others, you pay interest only and make a one-time full payment of principal at some set date. Or you may make interest-only payments for a specific period, and then begin to repay principal as well.

It's important to keep in mind that because your home serves as collateral for the line of credit, your home could be at risk if you default, or fall behind on repayment.