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Most people do not fully understand the difference between a Home Equity Loan and a Home Equity Line of Credit (or HELOC). While they share many similarities, the nuances can make all the difference in suiting your needs.
A Home Equity Loan is an amortized loan with a fixed interest rate and a fixed monthly payment secured by your home. This gives you the security of a fixed interest rate with a steady principal and interest repayment schedule for the life of the loan. Because the funds are disbursed in one lump sum, Home Equity Loans are typically utilized for major one-time expenses such as home improvements, debt consolidation, or education expenses.
A Home Equity Line of Credit (or HELOC) is a revolving line of credit with a variable interest rate that is also secured by your home. As a line of credit, you get the flexibility to access the available funds on your HELOC as you need them up to your approved credit limit. And, as you pay down the balance of your HELOC, you can reuse the available funds in the future. Like a Home Equity Loan, a HELOC, is a popular way to finance home improvements, debt consolidation, or other expenses. However, unlike a Home Equity Loan, a HELOC gives you the flexibility to borrow the funds you need as you need them up to your approved credit limit with the ability to reuse your available funds in the future. This can be an ideal way to finance an on-going need or simply to have the funds available should a need arise.
When you’re ready to apply for any loan, give us a call. We’re here to help you make the right decision for your specific needs.