A home equity line of credit (HELOC) is a line of credit secured by your home that gives you a revolving credit line to use for large expenses or to consolidate higher-interest rate debt on other loans such as credit cards. Heres how a HELOC works:

• Collateral: With a HELOC, youre borrowing against the available equity in your home, and the house is used as collateral for the line of credit.

• Revolving credit: As you repay your outstanding balance, the amount of available credit is replenished, much like a credit card. This means you can borrow against it again if you need to, and you can borrow as little or as much as you need throughout your draw period (typically 10 years) up to the credit limit you establish at closing.

• Interest rate: A HELOC often has a lower interest rate than some other common types of loans, and the interest may be tax-deductible. However, the interest rate is variable and can change over time.

• Qualification: To qualify for a HELOC, you need to have available equity in your home, meaning that the amount you owe on your home must be less than the value of your home. You can typically borrow up to 85% of the value of your home minus the amount you owe. Also, a lender generally looks at your credit score and history, employment history, monthly income, and monthly debts, just as when you first got your mortgage.

• Repayment: During the draw period, youll receive monthly bills with minimum payments that include principal and interest. After the draw period ends, youll enter the repayment period, during which youll need to pay back the remaining balance, typically over a period of 10 to 20 years.

In summary, a HELOC is a flexible way to borrow money using your home as collateral. It can be a good option for large expenses or consolidating high-interest debt, but its important to understand the risks and requirements before applying.