Choosing Heloc Over Equity Loans

One thing about owning property is that it helps in getting loans. One can easily obtain secured loans by using the house as collateral. Moreover, secured loans are a lot more affordable than the unsecured variety. Those who have no mortgages to pay should take a look at the secured loans. Those who are still paying off the mortgage installments can make use of the equity on their home to make use of the various other available options. More importantly, these days, there are far more options than just home equity loans. There are other lines of credit that one can go in for.

HELOC or Home Equity Line of Credit is among the various new options being used instead of the home equity loan. In the case of HELOC, the bank provides a number of equity checks that can be issued as and when to take a loan depending on one’s equity balance. These equity checks, typically allow us to draw on a specified equity amount. The great thing about HELOC is that we are not required to draw out a single large amount. The checks give us the freedom to draw only the required amounts at the time.

This also means that the interest amount that we pay every month varies depending on the amount of loan taken. Moreover, the rates of interest for home equity lines of credit are variable. They are affected by market fluctuations. Thus, you might find yourself paying a higher interest rate one month, and a considerably lower one in the next. However, while making your final choice, make sure that you go with the one that charges a lower APR overall. Also, make sure that you are aware what the cap is on the interest that will have to be paid by you. This rate cap is different across states and lenders.

Thus, a HELOC is very different from the traditional home equity loan. Whereas HELOC allows one to advance oneself varying loan amounts over a period of time, a home equity loan amount is obtained at a single time. Just as HELOC has variable rates, a home equity loan has always had fixed rates of interest. This rate will not be subject to ups and downs depending on market conditions. As far as repayment terms are concerned, a home equity loan involves fixed monthly payments that are made throughout a certain number of months. In HELOC, repayment is much more adjustable. Overall, the two are very different, and which one you choose would depend on your own particular needs.