Home Equity vs. Line of Credit

A home equity loan is for a fixed amount, and you get the money at one time.

A home equity line of credit, on the other hand, will have a maximum amount, but you can take out cash when you need it. So if you have $20,000 in your home equity line of credit and want to take out $2000 to build a deck this month, you can. If next month you decide to pay off $6000 in credit card debt, you can then take out another $6,000. If you don't take anything out, you often won't make any payments at all, and if you do, you only make payments on the amount you've borrowed. This type of credit is typically revolving, which means you can borrow, and then pay back, and then borrow again when you need to.

The interest paid on either type of loan is normally tax deductible - but make sure you see your tax advisor for details.

Both types of loans use the equity in your home for things like remodeling, college costs, paying off high-interest debt, etc.

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