What’s the difference between a Line of Credit and a Loan?
Home Equity Lines and Loans are both very inexpensive ways to borrow money. They have very low interest rates because they are secured by the equity in your home and pose relatively little. Also, the interest paid on a Home Equity Loan or Line is usually tax deductible. The combination of these two factors makes them one of the most economical ways to borrow money. Home Equity Lines are generally more “flexible” than Home Equity Loans. Home Equity Lines work much like a credit card. You only borrow money when you need to, and when you pay down your balance that portion of your Line is available to borrow again. In essence, you can “give yourself a loan” whenever you need to. When you obtain a Home Equity Loan, you receive all of your money at once and immediately start repaying your Loan. As the outstanding balance of your Loan is repaid each month, that money is not made available to you to borrow again until you open a new Loan.
