Key Differences
| Feature | HELOC | Home Equity Loan |
|---|---|---|
| Rate Type | Usually variable | Usually fixed |
| How Funds Work | Draw as needed up to a limit | Lump sum at closing |
| Best For | Ongoing or uncertain project costs | One-time, defined expenses |
Pros and Cons
HELOC
- Flexible borrowing; interest on what you use
- Variable rates can increase payments
- May include annual or draw fees
Home Equity Loan
- Predictable fixed payment
- Interest begins immediately on full amount
- Good for one-time, fixed-cost projects
How to Decide
- Match the tool to the expense: flexible vs. fixed.
- Consider your rate risk comfort and budget stability.
- Compare total costs, including fees and potential discounts.
Talk to your lender about current rate structures and promotional periods. This article is educational, not advice.