Hearken back to those days just three or four years ago when interest rates hovered at historically low levels.

Americans like to spend, so the rock-bottom interest rates fed the obsession. Money was cheap and easy to obtain.Thirty-year mortgages could be had for 5.5 percent or less. Car loans were equally inexpensive, as were other consumer loans.

And variable-rate home-equity lines of credit (HELOCs) tied to the prime interest rate (the interest rate banks charge their most credit-worthy customers) were a great deal when rates were 4 percent or even less.

Today, with the prime rate increasing to 8 percent, variable rate HELOCs aren't nearly as enticing. Unlike adjustable-rate mortgages (ARMs), which typically are limited to annual increases of 2 percentage points (and are often capped at an increase of 5 percentage points over the life of the loan), there are no such restrictions on HELOCs.

Increasingly, investors are concerned about what to do with these credit lines now that the rates have risen. In turn, they're asking their financial advisers for advice.

For those with investments in taxable accounts, they are faced with a choice: Should I keep the line of credit active, or take some money from my investments to pay off the outstanding balance?

Here's a basic rule of thumb: When the HELOC rate gets to 7 percent or more, pay off the line. That's comparable to getting a guaranteed 7-percent-plus rate of return on your investments. (Do note that paying off your HELOC debt doesn't close the line. It will still be available in case of emergencies.)

Of course, there are other possibilities.

For example, you could pay off the HELOC by taking out a fixed- rate home-equity loan. That loan's rate might be higher, but it will not increase, thus establishing regular payments -- and peace of mind.

Another option is a "cash-out" refinancing of a primary mortgage. That involves borrowing more than the outstanding balance on the primary mortgage, and using the proceeds to pay off the credit line.

Those planning to sell their homes within the next few years probably shouldn't consider this option. The closing costs probably would outweigh the monthly savings in the short-term.

In any case, the days of financing home improvements or other purchases with cheap money from a HELOC have passed.

With the prime rate at 8 percent, it's time to consider financing any big projects with your savings and investments if you have them, deferring your expenditures until you have had a chance to save up the money or until rates are once again at low levels.

Tony Proctor is a certified financial planner, and can be reached at tony@proctorfinancial.com

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