Home Equity Loan
You've decided to use the equity in your home, but you don't know whether a home equity line of credit ("HELoC") or a home equity loan is the best route for you. It can be confusing since the two options seem so similar. The difference mainly depends upon whether you need a set dollar amount or an undetermined amount of cash.
We have found that the HELoC was a more popular, convenient choice for most homeowners. They typically used the line of credit to pay off some credit card bills or go on vacation. As the loan is paid back, you have more equity or "credit" to use in case of emergencies.
The following article by Jakob Jelling should help you distinguish between the two types of credit and help you decide which is best for your current situation.
Do You Need A Home Equity Loan or Line of Credit?
A home equity line of credit is very closely related to a home equity loan but the subtle differences can mean a lot. Determining which option is the best for you relies upon you knowing your current situation and having a clear plan for what you wish to accomplish with the money.
How Does A Home Equity Loan Work?
A home equity loan is a lot like a mortgage. With a home equity loan you are able to borrow the amount of your homes value that you have already paid off. The benefits of this type of loan is that it is almost always guaranteed since it is based upon the amount of your home that you already own, the terms are almost identical to a mortgage and  you receive the entire amount of the loan up front after closing.
Click on the link at the left to compare mortgage loans. It only takes 60 seconds to receive several quotes.
Home equity loans make perfect sense if you know the exact amount that you need to borrow. While it is always nice to have cash on hand it is often better to have more credit available to you. The more of your credit limit that you use up the higher the interest rates will be for you and the tougher it will be to borrow more money in the event of an emergency. It is definitely to your adva
ntage to only be in debt for a specific amount to complete one project.
How does the HELoC differ?
While a home equity line of credit is also based upon the amount of your home that you currently own, the terms of the loan are very different. A home equity line of credit is basically a credit card where the limit is the amount of equity that you have in our home. Instead of receiving one large lump sum of cash, you will receive an overdraft type of service on your account that will allow you to withdraw as much or as little of the equity that you wish to use.
A line of credit option may be better depending upon what you wish to do with your money. While you will still use up a portion of your credit limit, the payments and impacts on your available credit may be lower. With a line of credit you always have the same amount of money available to you. As you pay off the amount of credit used, you can reuse that portion if needed without having to apply for another loan. Also your payments may be considerably lower since you are only paying on the amount of money that you have actually used, not the total amount borrowed.
Which choice is better for you?
The answer depends upon what you need the money for. With a home equity loan the monthly repayment schedule is known and the interest on your loan will be lower than most other types of loans. However, with a home equity line of credit, you have instant access to cash and the payments will vary depending upon the interest rate (A HELoC is usually an interest only loan). With this in mind the question really becomes do you need access to a varying amount of money or one known lump sum of cash?
A lump sum of cash with a set repayment schedule is great for specific things such as debt consolidation or the funding of specific projects with a predetermined cost. If you are considering debt consolidation for credit cards or any other high interest loans a home equity loan is most likely a very good idea. You will be able to repay all of your debt and will only have to make one monthly payment at a lower rate of interest that you are currently paying on your cards and other unsecured loans.
As you can see there are some big differences between a home equity loan and line of credit. If you are looking at a single project, such as a new car or adding a pool to your home, a home equity loan is the better choice for you. However, if you are looking at starting up a new business, wish to travel or can not settle on predetermined amount money, then a line of credit is the better option for you. With a line of credit you can use as much of your credit as you wish whenever you wish and, much like a credit card, you can reuse the amount of the line of credit that you have repaid with out having to re-apply for a loan.
Jakob Jelling is the founder of http://www.cashbazar.com. Visit his website for the latest on personal finance, debt elimination, budgeting, credit cards and real estate.
Conclusion:
Now that you know the difference, the only thing left to do is apply for a loan. You don’t need great credit to refinance your mortgage loan. get your FREE QUOTE today . Up to 4 lenders will compete for your loan, and the best part is, you don't have to leave your home or be put on hold for 30 or more minutes.
To find out more about the specific types of mortgages available to you, we recommend checking out this site: http://www.Factsaboutmortgages.com
| 
Your Prescription for Better Financial Health