 TITLE: HELOC vs. Personal Loan: Which Is Better? CONTENT: What Is a HELOC?\n----------------\nA HELOC is a revolving line of credit and second mortgage. You'll use your home as collateral to get a HELOC, and the value of your home helps determine the maximum amount you can borrow against it.\nGenerally, the combined balance of your HELOC and other mortgage(s) can be 60% to 85% of your home's appraised value. For example, if your home is appraised for $400,000 and you owe $200,000 on a first mortgage, you might get a HELOC for $40,000 to $140,000. The exact amount can depend on the lender and your creditworthiness.\nBorrowing against your HELOC is an _option_, not a requirement—although many lenders require an initial minimum draw that must be borrowed when the account is opened. You only pay interest on your draws, not the entire credit line. So, if you're approved for a $140,000 HELOC, for instance, you can choose to borrow just $25,000 of it without penalty.\nMany HELOCs have an initial 10-year draw period when you can borrow against your credit line and make interest-only payments. Then, depending on the loan, you may need to make a balloon payment when the draw period ends. Or, you could have a fixed term, such as 20 years, to pay off the balance. END