"Home Equity Loans vs. HELOC: What’s the Difference?"

When it comes to borrowing against the value of your home, two common options are Home Equity Loans and Home Equity Lines of Credit (HELOCs). While both allow homeowners to access funds using their home equity as collateral, they differ significantly in structure, usage, and repayment.

A Home Equity Loan is a lump-sum loan with a fixed interest rate and predictable monthly payments. It’s ideal for those who need a large amount of money upfront — such as for home renovations, debt consolidation, or major expenses. Since the loan terms are fixed, budgeting is easier and the interest rate remains constant throughout the repayment period.

On the other hand, a HELOC works more like a credit card. It provides a revolving line of credit that you can borrow from as needed, typically during a draw period (usually 5–10 years), followed by a repayment period. HELOCs usually come with variable interest rates, meaning your payments can fluctuate over time. This makes them more flexible but potentially riskier if interest rates rise.

Choosing between a Home Equity Loan and a HELOC depends on your financial goals, borrowing needs, and risk tolerance. If you prefer predictable payments and a fixed loan amount, a Home Equity Loan may be right for you. If you need ongoing access to funds with the ability to borrow only what you need, a HELOC could be more suitable.

This guide explores the key differences, pros and cons, and qualification requirements for each option so you can make an informed decision based on your unique financial situation.