What’s the Difference Between a Home Equity Line of Credit and a Home Equity Loan?

If you’re a homeowner looking to tap into your home equity, you may be considering a home equity loan or a home equity line of credit (HELOC). While both options allow you to borrow against the value of your home—often up to 90% of your home’s value—they work in very different ways. Understanding the differences between a HELOC and a home equity loan can help you make the best financial decision based on your goals and needs.

What is a HELOC?
A Home Equity Line of Credit (HELOC) is a revolving credit line that functions much like a credit card. You’re approved for a certain limit and can borrow from it as needed over time. As you repay what you’ve used, the money becomes available to borrow again.

Benefits of a HELOC:

Acts like a credit card, with reusable credit over time

Interest is only charged on the amount you borrow

Often comes with a variable interest rate, which may change over time

A HELOC is ideal for ongoing or unpredictable expenses such as home renovations, medical bills, or education costs.

What is a Home Equity Loan?
A Home Equity Loan, also known as a Closed-End Second Mortgage or Closed in 2nd Trust, is a fixed loan that provides a lump sum of cash upfront. You repay it over a set term with fixed monthly payments and a fixed interest rate.

Benefits of a Home Equity Loan:

One-time lump sum ideal for large expenses

Predictable, fixed interest rate and monthly payments

Great for debt consolidation, major renovations, or one-time purchases

Because of the predictability of a home equity loan, many homeowners choose this option when they have a clear idea of how much money they need and want stable payments over time.

Similarities Between a HELOC and a Home Equity Loan
While the structure of a HELOC vs home equity loan is different, both allow you to borrow against your home’s equity—often up to 90% of its value. They can offer lower interest rates compared to credit cards or personal loans and may be a smart way to fund major expenses.

Home Equity Loan or HELOC: How to Choose
Deciding between a home equity loan and a HELOC depends on how you plan to use the funds:

Choose a HELOC if you need flexible access to funds over time and are comfortable with a variable rate

Choose a Home Equity Loan if you prefer a fixed rate and consistent monthly payments for a one-time expense

Tap Into Your Home’s Equity with Confidence

Your home is one of your most valuable assets—and using your equity wisely can be a powerful financial tool. Whether you’re leaning toward a home equity line of credit or a home equity loan, our team is here to help you explore your options.

Contact us today to learn more about how you can access up to 90% of your home’s value with a solution that fits your goals.