Home Equity Loan Vs. Line Of Credit: Which is Right for You?
When choosing between a home equity loan vs. line of credit based on the equity you have built in your home, it can be difficult to know which is the best choice for your situation. When choosing between the two, it is important that you understand what the best situations for each really are, so as to decide which is best to solve your current financial problems.
What's the Difference?
The biggest difference between a home equity loan vs. line of credit based on your home equity is the amount of money you will actually need to borrow. If you don't have any need for a large sum of money, there's really no reason why you should take out a loan based on the entire amount of equity you have built up in your home. Instead, a line of credit which simply draws from your available equity for a specified period of time may be your best way to go.
This difference between a home equity loan vs. line of credit is also true if you will be able to pay the amount you borrow back within just a few months. Since lines of credit based on your equity most often have variable interest rates, if you can get in at an introductory rate and get it paid off before that introductory period expires, you could wind up saving yourself thousands in interest and fees.
However, if you are comparing home equity loan vs. line of credit and you need to borrow a substantial amount of money, or won't be able to pay it all back in a short amount of time, then you may want to consider a loan instead. By taking out a home equity loan, instead of a line of credit, you can lock yourself into a fixed interest rate that will remain constant for the life of your loan. This is great news for anyone who may need to take a few years to pay the loan back - especially with interest rates rising so high these days.
Really, the best ways to determine which is right for you, when choosing between a home equity loan vs. line of credit, is to first decide how much you will need to borrow and how long it will take you to repay. Once you have figured that out, choosing between a home equity loan vs. line of credit should be quite simple.
