How to Use a Home Equity Line of Credit

Using a home equity line of credit is similar to using a credit card in that it is a revolving line of credit. A lending institution estimates the amount of equity that you have on your house. You can then borrow up to this amount to be used towards whatever you like. The money is paid back through an increased mortgage payment.

Difficulty: Moderately Easy

Instructions

1. Decide if a home equity line of credit is the right option for you. If you simply need one large amount of money, then a traditional home equity loan may be a better option. A home equity loan usually has a lower fixed rate.

2. Put the money towards educational costs. A home equity line of credit can be ideal for the student that needs help covering tuition, books and other educational expenses that come up during college.

3. Use the credit line to pay off medical bills. Large medical bills can be difficult to pay off all at once. A home equity credit line gives you the option to pay off the collectors and then simply make a smaller payment each month.

4. Make home improvements using your home equity line of credit. A home remodel that requires paying several different workers and suppliers is made easy with a line of credit.

5. Consider a home equity line of credit as an emergency option. If you need money fast, then a home equity line of credit may be a better option than drawing on your credit card.

Tips & Warnings

• Don't use the home equity line of credit for everyday expenses. This increases your mortgage payment and makes it harder to pay it back.
• Once you pay down your debt on your home equity line of credit, don't continue spending. This makes it impossible to ever pay back the loan.