You’re in a situation where you decided to borrow against your home’s equity. But, you have a choice will you get a home equity loan or a HELOC (Home equity Line of Credit). What is the difference between home equity loan and heloc and does it matter? Here’s a look at the main differences.
How You Get the Money
A home equity loan is a set amount, and you get all of it at the same time. With a line of credit, you have a “max” that is set for you, but you can take out of it and pay it back at a variable rate. HELOCs are a lot more flexible than loans, and if you’re going to be doing something long term, a HELOC may make more sense.
Variable Interest Rates
Like all loans, a home equity loan has a set interest rate that you’ll pay for the entirety of the loan unless you refinance. HELOCs are going to vary based on your needs and what the going rate is for interest in this regard. As a result, your minimum payments will also vary.
When You Pay Them Off
Some people will have and use HELOCs for years and years they can be as long as 30 years, depending on your financial institution. A loan, on the other hand, is typically between 5 and 15 years, but you can extend it based on your needs.
See what you can learn and find options that make sense in relation to how you want to take care of things. When all is said and done, you can be sure that you’re making the right choice and that you have the money you need for whatever project you’re working on with your equity.