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Home >> Lending >> Home Equity
Home Equity Loan, Line of Credit
What is the difference between a home equity loan, and a home equity line of credit?
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 Borrowing against the equity in your home is often done with one of these two loans, or a combination of both. A home equity loan is a single advance loan meaning you borrow as much as you intend to at one time, and begin repaying the loan. This is a good way to consolidate debt, for example.
A line of credit differs. As with a credit card account, you have a maximum amount set by your lender. You can then access your line of credit a little at a time, as needed. This may work well when you pay for your children's college education, a semester at a time. You only borrow what you need.
As a general rule you will find a home equity loan has a fixed interest rate and a set schedule for repayment. This may be very friendly to your budget and makes financial planning easier. A home equity line however, may have a variable rate, which means the interest rate goes up and down, as will your payments. A line may have a set amount on which you can draw (take advances) and then it enters a repayment period, or it may be a revolving line. Revolving means that, as with a credit card, you can borrow and repay, again and again.
Your lender can tell you what options it has for you. You can then see which plan, from which lender, will meet your needs.
Published on BankingQuestions.com 7/28/06
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