| Home equity loans and home equity lines of credit are | | | | The majority of home equity loans have fixed rates |
| very beneficial, and can provide homeowners with | | | | and payments. Secondly, the money is acquired as a |
| quick cash for a variety of purposes. Although similar, | | | | lump sum. Once the homeowner receives the funds, |
| there are key differences that make these loans | | | | the money can be used for any purpose. The |
| unique. Before using your home's equity for home | | | | average term of a home equity loan is 15 years. |
| improvement, debt consolidation, etc., compare both | | | | However, homeowners have the option of repaying |
| options. | | | | the money sooner. |
| What is a Home Equity Loan? | | | | What is a Home Equity Line of Credit? |
| Home equity loans are similar to other types of | | | | Similarly, home equity lines of credit are based on the |
| personal loans. The majority of personal loans are | | | | home's equity. Instead of funds being received in one |
| secured. Usually, an applicant will provide the lender | | | | lump sum, lines of credit entail revolving credit accounts. |
| with a vehicle title or other valuable piece of property. | | | | If approved for an equity line of credit of $50,000, a |
| With a home equity loan, your home is the collateral. | | | | credit line is established for this amount, and |
| Home values are constantly increasing. Moreover, | | | | homeowners may withdraw funds as needed. |
| mortgage principles decrease. The difference between | | | | Lines of credit can be compared to credit card cash |
| a home's value and the amount owed to the | | | | advances. However, the rates are much lower on a |
| mortgage lender equals the equity. For example, if your | | | | line of credit. The length of a line of credit is usually ten |
| home is valued at $130,000, and you owe the | | | | years. At the end of the term, the homebuyer may |
| mortgage lender $80,000, the home's equity totals | | | | choose to apply for another credit line. Because the |
| $50,000. With a home equity loan, the homebuyer may | | | | rates are variable, payments are not predictable. To |
| choose to access all, or part of the home's equity. | | | | avoid high monthly bills, homeowner must quickly repay |
| Benefits of Home Equity Loans | | | | the money, and withdraw small amounts. |