Which is for You?  A Home Equity Loan or a Home Equity Line of Credit?

Introduction

If you are considering different financing options, you may be looking at both a home equity loan as well as a home equity line of credit.  In this regard, you may be wondering whether a home equity loan or a home equity line of credit is right for you.

Through this article you will be provided with some factors to consider when it comes to trying to decide whether a home equity loan or a home equity line of credit is the right choice for you.

Understanding a Home Equity Loan

A  home equity loan is a loan that takes advantage of the equity that has accumulated in your home or other piece of real estate.  The equity in a residence or other piece of real estate is the difference between any loan that it is outstanding on the property and the officially appraised value of the real estate.

Through a home equity loan, you are able to obtain financing for a portion of the amount that is considered equity in the property.

Understanding a Home Equity Line of Credit

This is another type of home equity loan.  It is similar to a second mortgage in that the real estate is used as collateral for the loan.  However, unlike with a second mortgage in which a consumer such as you obtains a lump sum payment from the loan, there is no lump sum payment with a home equity line of credit.  Rather with a home equity loan you obtain the proceeds from the loan rather like you receive funds via a credit card.  You receive money or the loan proceeds through a home equity line of credit in installments over time.
Debt Consolidation

A Home Improvement Program

A home equity line of credit can be a good resource for a person who is undertaking a long term or longer term home improvement project.  Through this type of financing, you can obtain the exact money that you need as your project progresses.

Emergency Cash

On the other hand, a lump sum home equity loan can be a good choice for you if you have a more immediate need for funding, if you need emergency cash.  This type of funding can be useful if you have something to deal with like a medical emergency.