So what is the difference between Home Equity Loans and Home Equity Lines of Credit or HELOC? I think it is better to understand these two types of loans and to have some upfront knowledge of the pros and cons of choosing as to what kind of loan one should get.
Home Equity loans – in this loan the barrower will get a fixed of money from the lender to be paid at the scheduled due date. More often than not, the interest rate is also fixed. This is kind of loan is more advisable for people who wants certainty of knowing what their payment schedule will because they know their loan is in fix interest and not increasing and for people who knows exactly their purpose of lending money.
Home Equity Line of Credit – is where the barrower has the right to lend up to a certain amount of money from a lender. The “line” is a credit line guaranteed by your house as collateral. There will be terms of the line wherein if the barrower fail to satisfy will turn into foreclosure of the house as it is the right of the lender.
This kind of loan is advisable to those who might need extra cash for some home improvements and for those who are planning to buy a different house. On the other hand, if the barrowers purpose of lending this money is for vacation or to finance other consumer debts, this is very risky choice because of the possibility of your house to foreclose. As far as I am concern, whichever loan is good as long as you first assess your capability of paying it.
1 comments:
I just moved to my new home with Moishe's moving company.they work in organized manner.So after all that i read this post which is very helpful for me as i was looking for home equity loan.but not aware of the procedure and details.Thanks for explaining the difference
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