heloc
A Home Equity Line of Credit (HELOC) is a line of credit that is tied to the equity of your house. For instance, a home is worth $500,000 and there is a first loan for $200,000, that means there is $300,000 of equity. In this example, a bank may approve the borrower for a line of credit for $100,000.
Unlike a loan that has a specific payoff term (15, 20, or 30 years), the line of credit works like a credit card. So in this example, the borrower may buy a car for $15,000 on that line of credit, which then means they would have $85,000 remaining that they could charge against the HELOC. If they borrowed $15,000, they would make payments only on the amount borrowed, just like a credit card.
