 TITLE: What Is a Home Equity Line of Credit (HELOC)? CONTENT: What to Consider Before Getting a HELOC\n---------------------------------------\nBefore getting a HELOC, you should carefully consider the advantages and disadvantages.\n**_Advantages of a HELOC_**\n*   **Low interest rates**: Because they're secured by your home as collateral, HELOCs have lower interest rates than unsecured loans or credit cards.\n*   **Large amounts**: Depending on your amount of home equity, a HELOC can allow you to borrow large sums of money. Getting a credit card with a $150,000-plus credit limit might be a snap for Kim Kardashian, but for most of us, a HELOC is an easier way to access that much credit.\n*   **Flexibility**: Unlike a loan, which requires borrowing the entire amount in a lump sum, a HELOC lets you use only as much credit as you need. If you get a $100,000 HELOC for a home remodeling project and it only ends up costing $75,000, you never have to use that extra $25,000 (which means you never have to repay it). If you had taken out a loan for that amount, you'd still have to pay back $25,000 plus interest.\n**_Drawbacks of a HELOC_**\n*   **Reduces your equity**: Building up equity in your home takes a long time. A HELOC can wipe out a substantial portion of your equity or in some cases, put you right back where you started. This can be a problem if home values in your area tend to fluctuate or if they drop unexpectedly, as happened during the 2008 recession. (In fact, if your home value declines substantially, your lender may freeze your HELOC.)\n*   **Sudden increase in payments**: When the draw period ends, your payments will increase substantially because you have to pay off the loan principal. This can be a big blow to your budget. If you're not prepared for this expense or if your financial situation has worsened in the 10 years since you took out the loan, you could have difficulty making the payments, and you could lose your home.\n*   **Risking your home**: The biggest disadvantage of a HELOC? You're putting your home on the line as collateral and could lose it if you can't repay the money you've borrowed. END