Home Equity Loan vs Home Equity Line of Credit

Leveraging the equity of your home is a great option when you’re planning home renovations, looking for a way to pay college tuition, consolidating debt, or needing money for another large purchase. Yet the complexity of available home equity financing options can make decisions stressful. Do you take out a home equity loan or opt for a home equity line of credit (HELOC)? It’s a decision many homeowners face, often clouded by the complexity of financial terms and the anxiety of making the wrong choice.

Many turn to endless online searches, sifting through generic advice that doesn’t necessarily apply to their unique circumstances. That’s where People's Community Federal Credit Union makes a difference.

With our local expertise, personalized service, and comprehensive financial guidance, we’re here to help you better understand your options. We provide a tailored approach based on your personal financial situation, goals, and dreams.

Similarities Between HELOCs and Home Equity Loans

Both home equity loans and HELOCs allow you to tap into the equity of your home, which is the portion of your home’s value that you own outright.

But what else do they share in common?

• Both are secured by your home, meaning your home serves as collateral for both types of loans.
• The interest paid on both HELOCs and home equity loans could be tax deductible, depending on how you use the loan. You’ll need to consult a tax professional to find out whether your situation applies.
• They often come with lower interest rates than unsecured personal loans or credit cards, since both are secured by your home.

What’s the Difference Between a Home Equity Loan and a HELOC?

The main difference between the two is how you receive the funds and how you repay them. With a home equity loan, you receive a lump sum upfront and make fixed monthly payments over a set term. On the other hand, a HELOC operates more like a credit card – providing you with a credit line that you can draw from as needed, paying interest only on the amount you use.

Should I Choose a Home Equity Loan or Line of Credit?

Your choice depends on your financial situation, goals, and how you plan to use the funds.

You might choose a home equity loan if… you have a one-time expense, such as a home renovation project or consolidating high-interest debt, and you appreciate the predictability of fixed monthly payments.

But you might choose a HELOC if… you anticipate ongoing expenses over a period of time, like funding a college education or undertaking a long-term home improvement project, and you value flexibility in borrowing and repayment.

Need help deciding? Our close-knit team ensures that you have a single point of contact who understands your financial details and which option is better for you.

Home Equity Financing Starts Here

It’s easy to resort to national banks or online lenders, searching for convenience – but you may end up with a loan or line of credit that doesn’t work for you.

People's Community Federal Credit Union stands apart in our approach. We see you as a member of our community, not just a transaction. We take the time to listen to your story, analyze your financial situation, and discuss the options that best support your financial goals. Our loans and lines of credit come with fair, competitive rates (which you can view here).

Your financial empowerment and achieving your dreams starts with a conversation. To get started, give us a call today or fill out a contact form here to speak with one of our representatives. You can also stop by one of our branch locations.