A wise man once said, "Dig a well before you're thirsty." Your personal line of credit is a valuable financial tool, providing cash only when you need it, and you only pay interest on the amount you actually use.

Your line of credit can be used for emergencies or when you need some extra cash, perhaps for a holiday or renovation. It's also an excellent way to consolidate credit card debt and replace it with a single lower monthly payment. Your line of credit has a low variable rate and you can make a full or partial repayment any time without a penalty. And any amount you pay back immediately becomes available for you to use again.

Smart strategy – lower your monthly debt.

Consolidating your debts is one of the easiest and smartest ways to use your line of credit. Simply pay off all your different credit card balances with it, then make only one monthly payment. Credit and department store cards can charge you as much as 28% in interest compared to your line of credit's variable rate. You'll save money every month in interest and the amount you pay is always flexible.

Credit limits – unsecured vs. secured.

The amount of credit you are approved for is based on your full financial picture, including your collateral security, income, credit history and personal net worth.

Unsecured lines of credit don't require collateral; for larger amounts, many use the equity in their homes or other real estate holdings as collateral for secured LOCs.