A home equity line of credit can improve your monthly cash flow by consolidating higher-interest debt or it can help increase your home’s value by financing renovations. But this line of credit requires discipline to avoid overborrowing against your home equity. Consider these strategies to protect your long-term financial security.


  1. Establish a repayment plan. One option is to set aside a portion of your home equity line of credit in a sub-account with a fixed-term repayment schedule.


  1. Pay more than just the monthly interest. You can usually pay down any amount of the money you owe at any time without an extra fee.


  1. Establish a clear plan. This includes making a realistic budget for any home renovation projects you are funding.


  1. Create an emergency savings fund. Using a home equity line of credit for an unexpected circumstance like job loss carries risks. You may find yourself in a debt spiral if you borrow money to cover your monthly bills for an extended period of time.


  1. Avoid further debt. It can be a smart decision to use a home equity line of credit to consolidate higher-interest debt. But if your spending habits are the cause of this existing debt, follow a budget and avoid the temptation to continually borrow against your home’s equity.


  1. Negotiate a lower credit limit. Lenders may approve you for a higher limit than you need, making it tempting to spend over your intentions and means.


  1. Shop around. Home equity line of credit interest rates vary from one bank to another.

As with any financial product, review your terms and conditions carefully and ask your financial institution questions about anything you don’t understand.