3 times you should get a HELOC (and 3 times you shouldn't)

If you own a home, you may have a significant amount of home equity. One common way to tap into it is by using a home equity line of credit , which can be a smart option for several reasons. For starters, HELOCs typically have competitive interest rates because they're backed by collateral: your home. And, as lines of credit, a HELOC allows you to borrow money during a draw period that lasts several years.

If you hit the limit on your credit line, you can pay the money back to reduce your HELOC balance and then borrow again. When you want to limit your borrowing costsWhen your draw period is over, your payments are based on the amount you borrowed from your credit line, plus interest and any other fees. You can keep your borrowing costs in line by limiting the amount of the credit line you use during the draw period or by paying back a portion of what you borrow before the draw period ends.

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