Whether a home equity loan or line of credit is better for you depends on a few factors:
Which Is Better: Home Equity Loan or Line of Credit? FAQs
A home equity loan is a lump-sum loan with fixed repayment terms, while a line of credit is an ongoing source of funds that can be accessed whenever needed, up to an approved limit.
It depends on your individual needs and financial circumstances. Both types of loans can help you access funds for major expenses, but it’s important to understand the differences between them before making a decision.
Interest rates for both types of loans are typically based on the current prime rate and can vary depending on your credit score and the amount of equity in your home. A home equity loan usually has a fixed interest rate, while a line of credit typically has an adjustable interest rate that varies with the prime rate.
Homeowners may be able to deduct up to $750,000 (for married couples filing jointly) of mortgage debt incurred after December 15th, 2017 from their taxes when taking out a home equity loan or line of credit. Consult with a tax professional for more information about eligibility and amounts.
Approval times may vary depending on the lender and your credit history, but typically the process takes between two and four weeks. Be sure to shop around for the best deal available.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.