Definition
A HELOC (Home Equity Line of Credit) allows borrowing against your home equity with flexible withdrawal terms and variable interest rates. During the draw period, you pay interest only on borrowed amounts. HELOCs offer lower rates than unsecured loans.
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A HELOC provides flexible access to capital for homeowners with substantial equity. During the draw period, borrowers can withdraw funds as needed and pay interest only on the amount borrowed. After the draw period ends, the account converts to a repayment period where no further withdrawals are possible. HELOCs offer lower interest rates than unsecured loans because they're secured by the home.
Pro Tip
Use a HELOC for investments or improvements that increase home value, not consumption.
Example
A homeowner with $100,000 in equity opens a HELOC with a $50,000 limit, withdraws $20,000 for renovations, and pays interest only on that amount.