Difference Between a Home Equity Loan & a HELOC

A home equity loan and a HELOC (Home Equity Line of Credit) are both types of credit that is secured by the equity in your home. The main difference is that home equity loans are a set amount loaned all at once while a HELOC has a limit like a credit card that you can draw from.

Line of Credit Versus Lump Sum

HELOCs are a line of credit, much like a credit card where you draw money against a credit limit while a home equity loan is taken as a lump sum.

Annual Percentage Rate (APR) Differences

HELOCs typically are a variable rate that can change per your loan agreement. Home Equity Loans are generally a fixed rate.

Payment Differences

HELOCs allow for interest only payments during the draw period. Home Equity Loan payments include part of the principal and the interest accrued for the previous month.

Which is Best For You?

For a well defined project, a home equity loan for the amount of your budget may be best. For less specific needs, a HELOC can allow you to draw money out when you need it.

Finding the Right Home Equity Line or HELOC

Websites such as LendingTree can help send your loan application to multiple banks and compare their offers. Local banks are other sources for home equity lending.

Resources

• LendingTree