How does a Home Equity Line of Credit (HELOC) work?

A Home Equity Line of Credit, or HELOC loan, allows you to borrow money based on the equity in your home. Since this is the biggest asset most people have, these types of loans are typically used for big ticket items like college tuition, medical bills, or home remodeling. The loan is usually granted as a line of credit, with a maximum amount that can be borrowed in any incremental or full amount at any time during the loan. Sometimes, the lender will set the credit limit as a percentage of the equity in the home. Checks or credit cards are generally issued for the loan account, so that homeowners can draw on the money at will, possibly with minimums set for withdrawal amounts.