Matt Richardson is the senior managing editor for the Managing Your Money section for CBSNews.com. He writes and edits content about personal finance ranging from savings to investing to insurance.

A home equity line of credit (HELOC) offers homeowners a cost-effective way to finance a variety of projects or expenses. And, based on data released over the summer, there's plenty of money to utilize, with home equity levels recently hitting a cumulative record high in the country. With interest rates on HELOCs lower than what's available for borrowers with home equity loans, personal loans and credit cards, a HELOC is also one of the cheapest ways to borrow right now.

But it's not a totally risk-free product, either. A HELOC does leverage your home's equity as needed and failure to make the agreed-upon repayments could lead to foreclosure. It also has a variable interest rate that's been steadily declining for borrowers in recent years, but because of its structure, it could make budgeting a bit more difficult compared to fixed-rate options.

To better improve their chances of HELOC borrowing success, then, it may help homeowners to know the smart ways to use the line of credit, especially now in the final weeks of 2025. Below, we'll break down three smart ways to use a HELOC, specifically, before 2026.

See how much home equity you'd be eligible to borrow with a HELOC here.

Considering borrowing with a HELOC now? Here are three effective ways to have it work for you in the final months of 2025:

The average credit card interest rate is around 21% right now. The average HELOC rate, however, is just 7.85%. That makes the latter almost three times more expensive than a HELOC. It makes sense, then, to use the HELOC to consolidate the high-rate credit card debt you're currently burdened with.

By paying off the debt with the HELOC, you'll reduce the number of monthly payments you have to make to just one and it will be with an interest rate that's much more affordable, too, setting you on a more rapid path toward permanent debt relief. Just be sure to calculate your repayment costs at a variety of different interest rates (thanks to the HELOC's variable rate) to more accurately determine a realistic repayment plan.

See how low your current HELOC rate offers are now.

Did you know that you can deduct the interest paid on a HELOC if the line of credit is used for specific home repairs and renovations? Projects like kitchen renovations, bathroom remodels, new rooms and more can all qualify for the deduction. This not only saves you money in a way that other borrowing products cannot, but it also makes concerns over the changing HELOC rate less pressing when you know that you'll be able to deduct the interest paid on the HELOC when tax season arrives anyway. Just be sure to apply for the HELOC (and use it for these projects) now, in the final two months of 2025, or your tax deduction will be delayed until it comes time to file for 2026, instead.

Inflation has risen in the past two reports released by the Bureau of Labor Statistics. Unemployment is up, too. Against this backdrop, a HELOC coordinated to be used as a back-up emergency fund could make sense, especially if your home's value and available equity to leverage have increased in recent years, as it has for many.

Remember, you don't need to make payments on the full HELOC line approved for, just for any amount borrowed. And full repayments won't be due until the initial draw period has concluded, as many lenders mandate interest-only payments on the HELOC to start. So this could be the smart way to boost your financial security in today's unpredictable economic climate. Just be smart in your approach, as your home equity is being leveraged here, and you don't want to borrow from it recklessly, potentially putting you in a worse financial position than where you started.

A HELOC can be a smart and functional tool for homeowners during many periods, but especially so now, in the final months of 2025. Whether it's used to consolidate high-rate credit card debt, to make specific home improvement projects, as a back-up emergency fund or for all three purposes, a HELOC offers homeowners a cost-effective way to borrow now. Just be sure to time any application carefully, as some of the features of a HELOC may be better exploited in the final months of the year (like home projects) versus being delayed into 2026.

3 smart ways to use a HELOC before 2026