Getting money when you need it is a common issue in modern society. Home repairs, school fees, medical bills, automotive maintenance all take their toll on the monthly budget.

For many home owners, and equity line of credit is a viable solution. But it is not without it's dangers.

First, what is an equity line of credit?

Basically, it is a loan granted based on the amount of equity you currently have in your home. Most lenders will offer up to 80% of your equity as a line of credit.

Other vendors will offer to advance 100% of your equity or more, but usually at a higher interest rate to cover the additional risk of loss.

These kinds of plans should be avoided. The chances are that you will end up in worse financial shape than when you started.

An equity line of credit differs from a traditional loan in that you don't owe the money (or interest) until the money is used. Often lines of credits come complete with checks that can be used to access the available funds. Once the check has been cashed, the payment clock is ticking and interest starts to accrue.

An equity line of credit may seem like a mortgage but it has one critical difference. The payments of a mortgage are structured so that the loan will be paid in full after a pre-determined period of time. Each payment covers a specific portion of the principal. Since the interest is calculated on the ever reducing balance, the amount of interest paid each month steadily decreases, and the total interest paid during that time can be calculated up front.

A line of credit often works more like a credit card, with a minimum payment that covers the current interest and a small portion of the principle. Paying the minimum each month can cause the equity line of credit to be extended for many years, accruing addition interest payments.

To avoid this problem you should follow these rules:

First, use as little as possible each time you access your credit line. If you don't borrow it, you don't have to pay it back.

Treat the credit line payments like mortgage payments. Determine to pay a significant portion of the principle each month.

Don't use the equity line of credit if you can't afford the increased monthly payments. This can result in a cycle of continued borrowing to make the payments on what is borrowed already.

Don't use the equity line of credit if you have a lot of current spending issues. Unless you can get your spending habits under control, the credit line just becomes an enabling factor for poor financial decisions.

Often the best place to get an equity line of credit is at your local bank, particularly if they hold your current mortgage. These are people with whom you have established an financial relationship over time. They will be more likely to advise you impartially than a lender that is trying to court your business.

Stick with companies with a good track record of customer service. The local and national consumer groups can help you check up on your potential loan vendor.