A home equity line of credit is a line of credit extended to a property owner. It is secured by the available equity in the property. Unlike a traditional equity loan, the borrower uses only the amount that they need in order to reduce expenses resulting from interest and loan payments. Many real estate investors use an HELOC in order to cover their operating expenses and treat the proceeds as they would incoming cash flow. The benefit of using a home equity line of credit as opposed to a loan is that the borrower is approved for a specific limit; however, they are only charged interest on outstanding funds. Lenders handle lines of credit in different ways; however, most will provide the borrower with immediate access to funds up to the approved limit.
