A big home equity line of credit was the "in" way to finance your dreams in the early 2000s.

Homeowners turned their rapidly appreciating property into piggy banks, spending that equity on everything from speedboats and luxury cars to pricey dinners and exotic travel.

Now millions of homeowners are tapped out, home prices are falling and home equity lines of credit -- or HELOCs as they're often called -- are much harder to get.

Still, if you have good credit and substantial equity in your home, there are some good deals out there.

Our extensive database of the best rates on home equity lines of credit shows many lenders are now offering homeowners with good credit (FICO scores of 660 to 749) 5.5% or less.

But the excesses of the past few years should have taught everyone a valuable lesson: Don't squander the equity in your home to live beyond your means.

That's why we asked nine of the wisest financial experts we know to help us come up with the six smartest ways to spend a home equity line of credit (and the five worst ways, too).

Smart move 1. Improve the value of your home.

This tops the list of all the financial pros as the best use of your home's equity. Use the money in your house to make it more valuable.

You could update your kitchen or bathrooms, add on a bedroom and bath or family room, improve energy efficiency with new windows or an updated heating and cooling system, or preserve the structural integrity of your home with a new roof. If you're making the improvements with resale in mind, just make sure you don't price yourself out of the neighborhood.

Our list of the 10 most valuable home improvementsshows which projects will add the most to your home's resale price.

Smart move 2. Pay off high-interest credit cards.

If your credit cards are charging double-digit interest and you are having trouble making the minimum monthly payments, then yes, it makes sense to use a low-cost home equity line of credit to pay off those cards and get out from under debt.

The experts agree with us, however, that this is a one-time offer, folks. This is not an opportunity to run up the balances again. Pay off the cards, cut them up and cancel all of them except one. Keep the oldest one for emergencies only.

If you just don't trust yourself, put the card in a safe deposit box or encased in a block of ice in the freezer. That ought to put a stop to impulse spending.

And don't forget for one minute that the collateral for this loan is your house. If you don't make the payments, the lender will foreclose on you.

Smart move 3. Use it for a rainy-day fund.

Everyone should have emergency cash for life's unexpected events, such as a job layoff, a serious illness, a major home improvement or a car repair. That fund should have enough money in it to cover three to six months of day-to-day living expenses.

Ideally, this should be cash on hand, sitting in a bank account earning interest. As a Plan B, a home equity line of credit could be used to tide you over until life gets back to normal.

Smart move 4. Buy a second home.

Many people have used the equity in their homes for the down payment on a vacation home or investment property. As investments go, this is a pretty good one, because you're leveraging one appreciating asset to buy another.

You'll gain the tax benefits of the second property; if you plan to rent it out, those payments should cover your investment. The thing to remember is that a house is an illiquid asset, particularly in today's real estate market. If you get in a financial bind, you might not be able to sell it quickly.

Smart move 5. Put your kid through college.

The experts have mixed opinions about this.

On the pro side, it's a noble use of your money to help your child achieve his or her potential. You only use the money as it's needed instead of taking out a lump-sum loan, and there are tax benefits associated with the mortgage interest deduction.

But some experts oppose this for philosophical reasons, arguing that the student should be the one making the investment in his or her future.

There are many other ways to finance a college education, and they think going that route would provide a fitting introduction to the adult world.

There's also the risk that the student won't do well in school and the money will be down the drain. But all in all, we think it's a smart use of your home equity.

Smart move 6. Start a business.

This one is at the bottom of the list because many businesses fail, and if yours did, it could put your house at risk.

The problem is that banks have historically been reluctant to lend money to new businesses, and investors generally want to see your commitment to the business before they kick in their cash.

As a result, countless entrepreneurs have launched successful companies by borrowing against their homes. If you've done all your homework, have a solid business plan in place, a marketable product or service and a supportive family that believes in your vision and ability to succeed, this is a way to accomplish that.

By Pat Curry

Interest.com Contributing Editor

Have a question about your finances? Ask us at editors@interest.com.