Need a little extra cash for that home makeover or personal project?
07/15/2025
Home Equity Loan vs Home Equity Line of Credit (HELOC)
Need a little extra cash for that home makeover or personal project? A Home Equity Line of Credit or a Home Equity Loan might be just the ticket. Dive in as we break down the fun similarities and differences between these two ways to tap into your home's equity
Both a Home Equity Loan and a HELOC (Home Equity Line of Credit) allow homeowners to borrow money using the equity in their homes as collateral.
A Home Equity Loan is typically structured as a lump-sum loan with a fixed interest rate and fixed repayment term, while a HELOC functions more like a credit card with a revolving line of credit and a variable interest rate.
When you take out a Home Equity Loan, you receive all the funds upfront, making it suitable for large, one-time expenses.
In contrast, a HELOC allows you to borrow as needed up to a certain limit, which provides flexibility for ongoing or unpredictable expenses.
Both financing options have tax advantages in some circumstances, particularly if the funds are used for home improvements, although homeowners should consult with a tax professional for current rules.
Lenders assess both options similarly by evaluating your credit history, the equity in your home, and overall financial stability.
Repayment for a Home Equity Loan is consistent as it involves equal monthly installments, while a HELOC often requires interest-only payments during the draw period, followed by principal and interest payments later.
Ultimately, the choice between a Home Equity Loan and a HELOC depends on your specific financial needs, repayment preferences, and the type of expenses you plan to cover. Both can be a great financial tool to help manage expenses.
