HELOC vs. Home Equity Loan

What is a HELOC?

A Home Equity Line of Credit (HELOC) is a revolving credit line secured by your home. You draw funds as needed during a draw period (typically 5–10 years), paying interest only on what you've borrowed. After the draw period, a repayment period begins (typically 10–20 years) during which you repay principal plus interest. Most HELOCs carry variable interest rates that adjust with a market index — your payment can rise or fall over time.

What is a home equity loan (HELOAN)?

A home equity loan provides a fixed lump sum at closing, repaid over a set term with a fixed interest rate and equal monthly payments. It works like a traditional installment mortgage. You know exactly what you'll pay each month from day one, making budgeting straightforward.

Key differences at a glance

• Structure: HELOC = revolving credit line  |  HELOAN = lump-sum installment loan.
• Rate: HELOC = typically variable  |  HELOAN = typically fixed.
• Fund access: HELOC = draw as needed  |  HELOAN = full amount at closing.
• Payments: HELOC = interest-only during draw, then P&I  |  HELOAN = P&I from day one.
• Best for: HELOC = ongoing/phased costs  |  HELOAN = one-time known expense.

Which is right for you?

A HELOC suits flexible, ongoing needs — phased home renovations, an emergency reserve, or costs you can't predict exactly. A home equity loan suits a single, defined expense where payment predictability matters, such as a full renovation project or high-interest debt consolidation.

Both products use your home as collateral. If you can't make payments, you risk foreclosure. Compare total costs — including origination fees, closing costs, and variable-rate risk — and consult a licensed mortgage professional before deciding.