 TITLE: Best and Worst Ways to Use a HELOC CONTENT: What Is a HELOC?\n----------------\nA HELOC is a revolving credit line that lets you borrow against your home equity, using your home as collateral. (Your equity is your home's assessed value minus your mortgage balance.) You can typically borrow 60% to 85% of your home's equity. Most HELOCs have variable interest rates, usually with a rate cap.\nYou can draw as much as you need from the HELOC up to the borrowing limit during the draw period (usually 10 years) and make interest-only payments on the amount you borrow. Unlike other types of revolving credit such as credit cards, HELOCs aren't counted as part of your credit utilization ratio by the FICO credit scoring model, so your HELOC balance won't negatively affect your FICO® Score☉ .\nAfter the draw period, you'll have to repay the loan in full, generally over 20 years. (You can also choose to refinance it.) HELOC payments rise substantially at this point, so be sure to budget for the cost. Some HELOCs let you pay down principal during the draw period, making post-draw-period payments more manageable.\nLike HELOCs, home equity loans use your home as collateral. Unlike HELOCs, however, they are installment loans: You receive a lump sum and begin making fixed monthly payments immediately. Most home equity loans have a fixed interest rate. END