What is the difference between a home equity line of credit and a home equity loan?

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What is the difference between a home equity line of credit and a home equity loan? I know that both are secured loans, putting up your home as collateral for the money you borrow. But what about the interest rates?

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A loan has a one-time withdrawal up front. A line of credit can be drawn against (and paid back) as you like, though mine have always had a 10 year maximum period for this. After that, no more withdrawals and monthly payments are required to reduce the balance.

also i think equity loan is a fixed rate .. where line of credit would vary along with prime rate & can reset every month.

Also, it's typical for HELOCs to have lower closing costs than home equity loans.

prozario said:   also i think equity loan is a fixed rate .. where line of credit would vary along with prime rate & can reset every month.
  This is correct. Some HELOCs do come with a fixed rate option so that the variable rate can be converted to a fixed rate under certain conditions.

Think of it as an installment "loan" versus a credit card, or "line of credit" as the names imply.

BostonOne said:   Also, it's typical for HELOCs to have lower closing costs than home equity loans.
  I only had credit report fee for HEL, other costs were de minis

Is google off(line) today for tax day?

NoMoneyInMyWallet said:   Is google off(line) today for tax day?
  no , it works for me. is it not working for you?

rufflesinc said:   NoMoneyInMyWallet said:   [sarcasm]Is google off(line) today for tax day?[/sarcasm]no , it works for me. is it not working for you?It obviously doesn't work for OP.

Point: This is a simple google search, not a worthwhile FWF post.
  

I will give a little defense of the OP in that I was confused on them a couple years ago. I did solve via google though

In general, I think HELOC is the better product, and people are generally best served using it

wilked said:   In general, I think HELOC is the better product, and people are generally best served using it
For ongoing liquidity/safety net purposes, a HELOC is a no brainer, but if you are using home equity for a specific one-time expense - say a significant home improvement - that you plan to repay over a specific time period, a HEL is tailor-made for this purpose.  With the HEL, you get a fixed rate and a set repayment schedule, a necessary discipline for many borrowers.

I guess the only real advantage of the HEL over the HELOC is in case you expect interest rates to go up within the repaying period. If rates are expected to remain stable or drop down, for flexibility and lending cost, HELOC would be better.

I was shopping for a HELOC earlier this year and talked with a local lender on the phone about it to see their offerings. I was very clear from the start that I was only interested in a HELOC, but it quickly became clear that she was telling me about their HEL. I stopped her and clarified that I was only looking for a HELOC, but she again started steering it back to a HEL. I stopped her again, and only then did she tell me that they don't have any HELOC, only fixed loans, but she helpfully pointed out that there was no pre-payment penalty on their HELs.

Uh, no thanks lady.

Shandril said:   I guess the only real advantage of the HEL over the HELOC is in case you expect interest rates to go up within the repaying period. If rates are expected to remain stable or drop down, for flexibility and lending cost, HELOC would be better.
  Most predictions about the direction of interest rates over the last 8 or 9 years have been wrong, so it's a crapshoot at best to know what rates are expected to do. Not a great way to decide.

BostonOne said:   Shandril said:   I guess the only real advantage of the HEL over the HELOC is in case you expect interest rates to go up within the repaying period. If rates are expected to remain stable or drop down, for flexibility and lending cost, HELOC would be better.
  Most predictions about the direction of interest rates over the last 8 or 9 years have been wrong, so it's a crapshoot at best to know what rates are expected to do. Not a great way to decide.

Hel is fixed rate and no prepayment penalty. So you are protected both with high and low



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