We have talked about home equity loan and home equity Line of Credit or HELOC in the past. But can you please quickly summarize these for me?
Both home equity loan and home equity Line of Credit let you borrow against your home equity. Both could give you access to a large amount of money, usually at a low interest rate. And both are easy to qualify for, since they are secured or backed by your home.
Well, both home equity loan and home equity Line of Credit sound awesome!
Well, it’s not all sunshine and rainbows.
Both make it very tempting to borrow against your home equity and use the money for short-term expenses like taking a vacation or buying a car, which is not good for building your wealth and net worth.
And with both these, the bank can foreclose the loan and sell your house to recover its money if you are unable to repay for any reason, because your home is used as the collateral.
Wow, that’s scary. But they still sound extremely similar. Are there any differences between home equity loan and home equity Line of Credit?
Of course there are differences!
With a home equity loan, you get large lump-sum money up front for your use. But with a HELOC, you can borrow any amount up to a certain limit as and when you need it.
A home equity loan usually has a fixed rate of interest, whereas a home equity Line of Credit usually has a floating or variable interest rate.
HELOCs typically require a higher credit score to qualify for than home equity loans.
While home equity loans have closing costs and points just like mortgages, HELOCs generally do not have these.
Podcast: Home Equity Loan vs Home Equity Line of Credit HELOC
Fun, informative and concise episodes by a 10-year old, breaking down complex financial concepts in a way that kids and beginners can understand. Episodes cover personal finance topics like saving, investing, banking, credit cards, insurance, real estate, mortgage, retirement planning, 401k, stocks, bonds, income tax, and more, and are in the form of a conversation between a cowboy (a finance novice) and his friend, a stock broker. Making finance your friend, only at Easy Peasy Finance.
A little bit about me: I have been fascinated with the world of personal finance since I was 6! I love to read personal finance books, and keep myself updated on the latest by reading various personal finance magazines. My friends often ask me questions about finance because they find it complex and intimidating. That’s what inspired me to start my YouTube channel called Easy Peasy Finance when I was 8, and this podcast 2 years later.
Home Equity Loan vs Home Equity Line of Credit: a quick comparison between the two options.
Show notes and transcript at: https://www.easypeasyfinance.com/comparison-home-equity-loan-vs-home-equity-line-of-credit-heloc/

