What is the difference between a home equity loan and a line of credit?
An equity loan allows you to borrow a set amount of money at a fixed interest rate. If you need a large amount of cash, then this is a good option for you. The rate of interest is fixed so you always know what your monthly payments will be and you can use the money for a number of things including home improvements, debt consolidation or other major expenses. An equity line of credit allows you to reserve a line of money that you can use only if you need it. You can borrow from that line at any time in the future so you have the security that if you need the money, you can access it. You will make no monthly payments until you actually draw on the money. An equity line enables you to be ready in case extra expenses arise such as medical bills, emergency home repairs, and college tuition. The interest rate on an equity line of credit is not fixed; it varies based on the prime rate.
