Home Financing 101: Home Equity Lines of Credit vs. Home Equity Loans
When it comes to home financing, a home equity loan can be categorized in two ways: a home equity line of credit and a home equity loan. While they may appear similar at first, they have fundamental differences that make one more appropriate than the other, depending on your needs.
A home equity line of credit is a revolving credit line with a credit limit. Similar to how credit cards work, you can borrow against your line of credit multiple times, when you need it. As you pay it back, the funds are available to you to use again.
A home equity loan works differently. You receive a one-time lump sum and pay it back in equal monthly installments over the term of the loan.
Both types of loans use your home as collateral, and may be used for educational expenses, home improvement, or to pay for other unplanned expenses.
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