Home Equity Resources

The Difference Between an Equity Line and a Loan

July 10th, 2008

Home equity loans are offered in various forms, including credit lines. In other words, the

borrower may have the choice to consider home equity loan or line of credit. The equity loans

are offered in one large sum to the borrower to help him pay off debts, reduce high interest on

credit cards, pay off tuition, remodel his home to build equity, and so forth.

Once the borrower agrees to the terms and conditions on the loan, the borrower often receives

money to repay the first mortgage and additional savings to remodel the home, or do what the

borrower intended to do with the money. On the other hand, if the borrower is offered a line of

credit for ten years, at leisure, the borrower can use the credit for any purpose intended by the

borrower. The line of credit allows the borrower to payoff the loan differently from the equity

mortgage loans.

It depends on the lender, but a few have restrictions on the credit lines, meaning that the

borrower can take out the full amount at once or else the borrower can only take out limited

amount. Once the balance is paid in full,

then the borrower can take out more credit to use at

leisure; however, some lenders stipulate what the money must be used for, regardless if the

borrower is repaying the debt.

The interest on credit lines are Prime Rates that are not based on a fixed interval. Thus, this

poses a threat to most borrowers. The home equity loans are often fixed rate and deductibles on

taxes may be included. Thus, to decide which option is right for you, you would weigh out the

differences of the terms and conditions, stipulations, APR, interest and other pending costs

involved in loans or credit.

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