HELOC vs Home Equity Loan


HELOCs (Home Equity Line of Credit) and Home Equity Loans are similar since they both allow you to borrow using the equity in your home, but there are a few noteworthy differences to consider when deciding which option is the best fit for your needs.

Access to Funds

A HELOC provides the flexibility to borrow only what you need when you need it, while a home equity loan is a lump-sum disbursement. Since you get all the funds at once, a home equity loan is a good option for large, one-time expenses. If your needs are ongoing, a HELOC may be a better way to go.

Fixed or Variable Rate

HELOCs and home equity loans both usually have a lower interest rate compared to credit cards and other loan types. The difference is that a HELOC usually comes with a variable interest rate, while most home equity loans have a fixed rate. With a variable rate, your monthly payment could go up or down if rates fluctuate. A fixed rate means your rate and monthly payments won’t change during the term of the loan.

No matter what you choose, using the equity in your home can be a good way to finance home improvements or other major expenses. Consult your banker or use a debt consolidation calculator to discover how much you can save and to ensure your new payments fit comfortably into your budget.