Need some cash? Borrowing against the value of your home is a solid money move. But should you get a Home Equity Line of Credit (HELOC) or a Home Equity Loan? Understanding how these two choices differ may be the ticket to making the smart move for your finances.
What Is a HELOC?
A Home Equity Line of Credit (HELOC) is an open-end credit line that allows you to borrow against your home's equity on an as-needed basis. It's like a credit card: you have a set credit limit and can draw money when you need it, paying interest only on the amount borrowed. HELOCs are typically variable-rate loans, so payments could fluctuate over time.
What Is a Home Equity Loan?
A Home Equity Loan is a fixed-duration loan that provides a lump sum of money upfront. You repay the loan in regular monthly installments with a fixed rate of interest, making it a stable and predictable lending mechanism.
When to Choose a HELOC
A HELOC is ideal if:
• You need flexible access to funds over time.
• You want to pay interest only on what you borrow.
• You have recurring expenses, like school expenses or renovation costs.
When to Choose a Home Equity Loan
A Home Equity Loan is better if:
• You prefer a fixed interest rate and predictable payments.
• You need a lump sum for a large one-time expense.
• You are consolidating high-interest debt into a single, manageable loan.
Which One Is Right for You?
The right choice depends on your financial needs and comfort with repayment terms. If you’re looking for flexibility and access to funds over time, a HELOC might be the way to go. If you need a set amount with fixed payments, a Home Equity Loan is a better fit.
Get Expert Advice From Central Willamette Credit Union
Still unsure which option is best for you? At Central Willamette Credit Union, we’re here to help you review your home equity options and find the best solution to fit your needs. Contact us today to find out more about your loan options!
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Consult with a financial professional before making any borrowing decisions.