Home Equity Loan vs. Home Equity Line of Credit

During the housing boom we saw several years ago, homeowners used the equity in their homes as a piggy bank. The credit crunch, the downturn in housing prices, and the recession turned the equity loan spigot off for many. As a result, banks lowered available credit in home equity lines of credit and sometimes closed HELOC accounts if no money was owed.

Now that housing prices are stabilizing and even going up again in some areas, banks have become more willing to open lines of credit. A HELOC or home equity loan can be a smart way to go if you’re in need of a loan.

Rates on both types of loans are typically lower than credit card rates and auto loan rates on average. The average HELOC rate is also cheaper than the average home equity loan rate and 30 year mortgage interest rate.

One major difference between the two types of loans is a home equity loan is a fixed rate loan and a HELOC is a variable rate loan, meaning the interest rate you pay can change at anytime.

Another major difference is with a home equity loan you are given the total loan at once and with a HELOC you can take out what you need (or nothing at all) but you don’t have to take out the entire loan amount.

If you’re looking for either type of loan, you can use our rate tables to find banks and lenders offering rates in your state or zip code. Find the lowest loan rates here.