| Your home is your most valuable asset and also | | | | years, during which you are allowed to draw any |
| allows you to obtain further home equity loans and | | | | amount within your credit limit. During this period you |
| credits when you are in urgent need of further loans | | | | are required to pay back the interest amount only. On |
| and credit. When people refer to these loans, they | | | | completion of the drawing period, you can no longer |
| generally refer to the terms 'home equity loans' and | | | | make any further withdrawals from the credit account. |
| 'home equity lines of credit' interchangeably. Though | | | | The drawing period is then followed by the payment |
| they may seem to mean the same thing, they are in | | | | period, which is the time you have to start paying off |
| fact quite different in nature. | | | | the principal as well as the rest of the interests. Certain |
| While home equity loans are more like the traditional | | | | financial institutions may renew the draw period, but |
| mortgages, in which you get the loan amount as a | | | | that only adds to your burden seeing that sooner or |
| lump sum and you then repay the interest as | | | | later you have to eventually pay off the principal. |
| installments over a set stretch of time. Home equity | | | | Once you obtain a home equity line of credit, you will |
| loans work on the principles of fixed rates and fixed | | | | be able to borrow within your credit limit whenever the |
| payments. | | | | need arises. You have to use special checks to draw |
| On the other hand, home equity lines of credit work | | | | on your home equity credit line. There are also certain |
| more like credit cards. This form of loan allows you to | | | | financial institutions and some credit plans that allow the |
| borrow an amount up to a certain limit. As you keep | | | | borrower to use a credit card to draw cash on their |
| on paying off certain portions of your debts, it opens | | | | credit line. |
| up more credit limit for you. These loans however, | | | | There are certain limitations with regard to how you |
| work on the principle of variable interest rates. | | | | make use of the home equity credit line. There are |
| Though home equity line of credit works on similar | | | | some plans where you are required to take out a |
| principles to the credit card, there are still some | | | | minimum initial amount when the credit line is initially |
| differences between these two forms of credit. Credit | | | | activated. Some plans may also fix a minimum amount |
| cards come with the typical open ended feature. But | | | | that you have to draw each time you are withdrawing |
| this is not the case with the home equity credit line. | | | | from the credit line. |
| There is a specified time frame, usually about ten | | | | |