• Home equity loans and home equity lines of credit are two ways to borrow against the value of your home. Though they both use your home as collateral, they differ in a number of ways.

    Accessing Funds

    When you take out a home equity loan, you get the money the day the loan is issued. With a home equity line of credit, you can withdraw the money as you need it.

    Interest Rate

    A home equity loan can have a fixed interest rate or variable rate while a home equity line of credit has a variable interest rate that will fluctuate with market factors.

    Interest Charges

    With a home equity loan, you will pay interest on the entire amount from the day the loan originates. With a home equity line of credit, you will only pay interest on the portion of the line of credit you are using.

    Costs and Fees

    A home equity loan will have closing costs that are usually lower than those of a mortgage but no annual fees. A home equity line of credit will usually have an annual fee in lieu of closing costs.

    Time Frame

    Home equity loans have repayment periods of one year to up to 30 years. Home equity lines of credit have a time period you can withdraw the money, such as 10 or 20 years, and then a time period that you must make payments on the money you have borrowed.


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