What does HELOC stand for?

HELOC stands for Home Equity Line of Credit. This financial product allows homeowners to borrow against the equity they have built up in their property, essentially using their home as collateral for the loan. It functions similarly to a credit card, permitting the borrower to access funds up to a certain limit, withdraw as needed, and pay interest only on the amount borrowed.

The concept of home equity is crucial here; it refers to the difference between the current market value of the home and the outstanding mortgage balance. Homeowners can tap into this equity through a HELOC, which can be useful for financing significant expenses like home renovations, education, or debt consolidation.

While other options suggest variations on the term, they do not accurately represent the widely accepted definition of a HELOC. Recognizing the correct terminology is essential for understanding how to leverage home equity effectively in personal finance.