A home equity line of credit is very closely related to a home equity loan but subtle differences can mean a lot. Determining which option is best for you relies upon you knowing your current situation and having a clear plan for what you wish to accomplish with money. A home equity loan is a lot like a mortgage. With a home equity loan you are able to borrow 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 amount of your home that you already own, terms are almost identical to a mortgage and you receive entire amount of loan up front after closing.
While a home equity loan is also based upon amount of your home that you currently own, terms of loan are very different. A home equity loan is basically a credit card where limit is 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 equity that you wish to use.
Which choice is better for you? The answer depends upon what you need money for. With a home equity loan monthly repayment schedule is known and 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 payments will vary depending but interest will vary. With this in mind 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 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.