What Is a HELOC, and How Is It Different from a Home Equity Loan
- By Jim Blackburn
- on
- 100 first time home buyer FAQs
1. A HELOC Works Like a Credit Card, Not a One-Time Loan
A HELOC (Home Equity Line of Credit) gives you access to a credit line you can draw from as needed—similar to a credit card. Instead of getting a lump sum upfront like a home equity loan, you:
- Borrow only what you need, when you need it
- Make payments based on what you’ve borrowed
- Can re-use the funds during the draw period (typically 5–10 years)
It’s ideal for ongoing projects, fluctuating expenses, or emergency funds.
2. Flexibility vs. Predictability
HELOCs offer more flexibility than home equity loans, especially if you don’t know exactly how much you’ll need. But there’s a trade-off:
- HELOCs usually have variable interest rates, meaning your payments can increase over time.
- Home equity loans offer fixed rates and fixed monthly payments, which make budgeting easier.
If you prefer predictability and want to borrow a specific amount for a one-time project (like a renovation), a home equity loan may be the better fit.
3. Choose Based on Your Needs, Not Just the Rate
Choose a HELOC if:
- You want flexibility
- You have ongoing or unexpected expenses
- You can handle rate changes and payment adjustments
Choose a Home Equity Loan if:
- You want a set amount upfront
- You prefer a consistent monthly payment
- You’re financing a one-time expense with a clear price tag
Both options can help you put your home equity to work—as long as you choose wisely.
Still Not Sure Which One Fits You Best?
Download our free “First-Time Buyer Game Plan” eBook — includes a side-by-side comparison chart of HELOCs vs. home equity loans
Chat live now to ask about current rates, draw periods, and qualifying factors
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