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HelpOn the surface, a home equity loan and home equity line of credit may seem the same, but it’s not quite that simple.
A home equity loan is likely best if you have a larger one-time need such as credit card debt consolidation, replacing a leaky roof, or paying for a child’s college expenses. With a fixed rate home equity loan, your monthly payments are fixed, which allows you to budget easily.
A HELOC — home equity line of credit — is a better fit if you will need in sporadically and not all at once. This product is good for example if used as your emergency savings vehicle, where you don’t plan to tap it often. A HELOC offers flexibility to borrow what you need, when you need it.
Questions to ask yourself:
- Do I need a lump sum, or in several draws? If a lump sum is needed, consider a home equity loan. Else the line of credit is likely the way to go.
- What monthly payment can I reasonable afford? A home equity loan is amortized over say 10 years meaning you’re paying towards principal and interest every month. With a home equity line of credit you can pay interest only for a time.
- Would a line of credit provide too much temptation? If lack responsibility, a home equity loan will force you to pay off the principal over time, unlock a revolving credit line.
- Am I okay with a fluctuating variable rate? Rates on home equity lines of credit adjust every time the Federal Reserve changes its fed funds rate. If you don’t like this idea, consider getting a fixed rate home equity loan.
Other articles you might like;
- Home Equity Loans Often Too Tempting for Homeowners | Home Equity Loans
- Home Equity Loans Often Too Tempting for Homeowners « Easy Home … Dollars on Me
- Home Equity Loans Often Too Tempting for Homeowners « Easy Home … | best--homeowner--loans.Co.CC
