Home equity loan vs. line of credit
If you’re considering using the equity in your home to obtain funds, it is important to understand the differences and similarities between home equity loans and home equity lines of credit.
define: home equity loan
A loan secured by and based on the borrower’s equity in his/her home.
Home equity line of credit (HELOC)
A revolving line of credit secured by and based on the borrower’s equity in his/her home.
With a home equity loan, the borrower is advanced the entire loan amount upfront initially. With a HELOC, the borrower can draw up to a maximum amount but is not advanced any portion of the line of credit upfront.
Each type of home equity funding has its benefits and downfalls. Whether a loan or line of credit is the best choice depends on how – and when – the borrower plans to use the funds.
Recommended reading: Home equity loan or line of credit – Which is the best option?
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2 Responses to “Home equity loan vs. line of credit”
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brady Says:
Line of credit is the way to go. No comparison. So much more flexibility and with rates so low right now, you don’t have to worry too much about the variable interest rates.
July 27th, 2009 at 10:30 pm -
Matt Says:
I agree. HELOC’s definitely give more flexibility. But home equity loans can be decent when there is some concern about the variable rate rising rapidly over a period of months or even years. But right now I would prefer a home equity line of credit for myself, no question about it.
July 30th, 2009 at 2:14 pm
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