Examining Differences Between Home Equity Loans And A Line Of Credit

As of lately, obtaining cash from one's home hasamount after principal is paid back.
never been simpler for homeowners. With the low(b) Interest Rate: Home Equity Line of Credit - Variable
interest rates over the last few years, everyone thatrate. Beyond the first monthly billing cycle, your interest
wanted to refinance has done so leaving the lendingrate is determined monthly, usually determined by the
market semi- stagnant.prime rate, when posted in The Wall Street Journal, in
At this point, lenders are anxious to loan to anyoneaddition to a operational margin.
that barely meets their criteria. Knowing what type ofHome Equity Loan - Fixed rate, Interest and payment
loan that suits your situation best is very importantstays the same.
before you feed yourself to the "loan lions"!(c) Payment Structure: - Monthly payments vary with
There has been a recent flood of companies offeringinterest rate and amount of principal which has been
home loans and lines of credit. To make Home repairsborrowed. These loans have a draw period, usually of
or put on additions, more and more Americans are5 or 10 years, during this time you have the option to
looking toward lines of home equity credit rather than apay only the interest, however beyond the draw
traditional home equity loan(also known as a secondperiod you must repay the principal and interest to pay
mortgage).down the loan within the remaining years.
Americans need to consider multiple things prior toH. E.L.O.C. - Interest and principal payment stay the
utilizing either of the above two financing products.same during the loan term.
Lines of credit usually are appropriate for people who(d) Loan Advances: Home Equity Line of Credit -
need a lower beginning rate and availability to moneySimply write a bank draft for $250.00 or more.
at unpredictable times. A home equity line is also goodHome Loan - Entire amount is received at closing.
if you are unsure what the project will cost.(e) Rate Advantages: Home Line of Credit - Less
Many homeowners are doing the contractinginterest rates than your unsecured credit lines such as
themselves. In this case a home line of credit is bestcredit cards.
as you simply pay for the project in an ongoing basisHome Loan - Lower payment options are available
until completion, thus borrowing only what is neededdue to a variety of terms.
and not coming up short due to unforeseen overages.(f) Tax Advantages(Ask your tax advisor): The
Home loans are more appropriate for those who needinterest on both types of loans may be 100%
specific amounts of cash with payment stability. Thedeductible!
biggest difference between these loans is the method(g) Other Advantages: - Appropriate emergency fund
in which you receive your money. Using a home equityfor unexpected emergencies or expenses. Can
loan, you receive the whole amount of money atincorporate multiple projects at one time.
closing. Using a home equity line of credit, one canHome Loan - Single use, less temptation to borrow
borrow cash when needed, up to a pre-determinedmore by just writing a check. Stable loan with a fixed
amount of credit.rate, fixed payment and easier to budget for.
See the following comparison for additional details.Our intention with this report was to clear up the
(a) Loan Funds Availability: Home Equity Line of Creditconfusion between the two loans. Always be sure to
- Borrow money when needed. You can borrow up todo your due diligence before you apply for any type of
the stated credit limit. When you pay down principal it isloan. Make sure you are well informed before seeking
added back onto the balance of your credit line to bea lender. I know it's hard to believe but not all lenders
used later.will be honest and upfront with the finer details of the
Home Equity Loan - Receive entire loan amount atloan you seek!
closing in a lump sum. You can not reuse this loan