How does a home equity line of credit work?

A home equity line of credit (HELOC) lets you borrow against the equity in your home, up to a set limit, similar to a credit card. You draw funds as needed during the draw period, typically 10 years, and pay interest only on what you use. After the draw period, you repay the balance over the remaining term. HELOCs typically have variable rates and are secured by your home, so default risks foreclosure.