Buy and Borrow
How to Choose Between a Home Equity Loan or Home Equity Line of Credit (Video)
December 04, 2024

One of the benefits of home ownership is that the equity in your home is there if you need it. So if you have home improvement projects or debt consolidation in mind, you can use the equity in your home to help get funding.
There are two options to use your home equity to get funding: a home equity loan or a home equity line of credit (HELOC). Each option is a loan that uses the equity in your home as collateral.
Before you decide which option is best for you, watch this video to learn about the differences between a home equity loan and a home equity line of credit.
Both options let you use the equity in your home as collateral for the loan.
A home equity loan is like a mortgage:
- Borrow a lump sum
- Fixed interest rate
- Fixed monthly payment
- Fixed terms so you will know exactly how long it will take to pay off
A home equity line of credit (HELOC) is like a credit card:
- Get approved for a credit line that you can use as needed
- Variable interest rate
- Monthly payments vary based on your loan
- HELOC does not have a fixed end date
Choosing the right option for you depends on your needs. For example, knowing how much money you need and how you are planning to use it.
A home equity loan could work if you need a specific amount for a particular job, like getting your roof replaced or consolidating debt.
A HELOC could work for longer-term needs that have costs that could vary, like help paying for college expenses or home improvement projects that need to be done in stages.
You may consider a home equity loan if:
- You know what your project costs
- You need to borrow a lump sum of money
- You would like a fixed interest rate and fixed monthly payments
- You want a fixed repayment plan to consolidate high-interest credit card debt at a lower interest rate
You may consider a HELOC if:
- You want to borrow as little or as much as you want, when you want it
- You are fine if your payments fluctuate rather than having a fixed amount
- You have upcoming expenses that may vary, so you want to borrow as needed
Whichever option you choose, look for a loan with low interest rates and fees. And remember to factor in monthly payments and potential tax advantages as you consider your options.
Learn more about our home equity loan and HELOC options at suncoast.com.
Category
Buy and Borrow
Tags
