A HELOC can be used when interest rates are low to purchase vehicles and other large items which would normally be financed with fixed rate loans. Check with your tax consultant about writing off the interest that is paid on these items. HELOC's can have a check and credit card attached to them for ease of use when purchasing against the equity of your home.

Some banks offer a discount in rate if the borrower set up auto debit. Auto debit is the automatic withdrawal from a the homeowner's designated checking account to pay the monthly interests. Other banks also give a lower interest rate to those who withdraw a certain amount from the line of credit at settlement. For instance, a bank may give a 1/8 discount in interest rate if the homeowner makes an initial draw of at least $25,000.

Most banks allow homeowners to borrow up to 100% of the house value. A handful of "non-prime" lenders even lend up to 110% of the value. As one can imagine, there are many restrictions on such high Loan-to-Value Home Equity Line of Credit. One of the most common restriction is an appraisal report on the property to ensure the house value is supported and that the local housing market is not in a down trend with declining values. Another restriction of high Loan to Value HELOC's is the home owner must furnish proof of sufficient income to repay the loan.

HELOC's are usually pegged to the Prime Rate, plus a margin, which is an additional interest points charge by the bank. The margin depends on the borrower's credit history. The Prime Rate is published in the Wall Street Journal and most other financial newspapers.

Home Equity Loans, similar to all mortgages, are secured by the house. Should the homeowner defaults on payments, the bank can foreclose on the house that is used as collateral.