HE Loan vs. HELOC: Which Home Equity Option is Best For You?

Want to tap into your home’s equity, but aren’t sure whether a Loan or Line of Credit is the best for you? A Home Equity Loan or a Home Equity Line of Credit (HELOC) allows you to utilize the equity you’ve accumulated over time for your own personal goals. LendingTree can help you choose the best option By filling out our simple form, you could be matched with up to 5 lenders to help you start tapping into your home’s equity.

Easy, right? Read more below about the difference between a Home Equity Loan and a Home Equity Line of Credit (HELOC).

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Should I Utilize My Home Equity Right Now Anyway?

Additionally, given the current state of the housing market of high house prices across the United states, now is the time to be tapping into your home’s equity for various different reasons. If you’re looking for an opportunity to refinance any type of loan, now is probably not the ideal time, given that the Fed interest rates are impacting refinance loans, and shows promise to continue raising rates in the coming months. However, utilizing your Home Equity ­­­­­­­­-­­­may help you accomplish these same goals.

Whether you know which home equity option you’d like to go with, or still need help deciding, LendingTree will help you find the best way to borrow from your home equity.

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So What’s The Difference?
Home Equity Loan Home Equity Line of Credit (HELOC)
  • A Home Equity Loan is like taking on a separate mortgage, coming from a onetime loan that will be paid back to the loaner through monthly payments.
  • A home equity line of credit, or HELOC, works more like a credit card.
  • Home equity loans have many uses, including:
    • Large home improvements/renovations
    • Paying off debt
    • Paying for college
    • Buying a rental property
    • Starting/Expanding a Business
  • Uses for home equity line of credit include:
    • Ongoing home improvement projects
    • Filling income gaps

Tuition payments

Similar to a mortgage, the interest that you pay on a home equity loan relates to the state of the federal rate at the time of establishing the loan.
  • Money can be taken from your home’s equity multiple times during a period, and interest is only paid on what is taken out.


See below for additional information about how a Home Equity Loan or HELOC could be used:

Home Renovation/Improvement

  • Adding on a large addition or taking on a major renovation? A Home Equity Loan may be the best option for you if your planning on completing this project within a shorter period of time, but would like to pay off the expenses over time.
  • Completing smaller projects over a longer period of time? A Home Equity Line of Credit may be the best option for you, allowing you to keep the HELOC open as you complete different projects over a multi-year period. You’ll only pay interest as you take cash out, and can pay back the money you take out over time.


Debt Consolidation

  • Wanting a more flexible payment option? A Home Equity Line of Credit can help you make payments towards debt consolidation when you are able, providing more flexibility than a Home Equity Loan.
  • Wanting a lower interest rate or monthly payment? A Home Equity Loan may be the right option for you, as this will likely lower the interest rate compared to the interest rate on a credit card, and can help you create smaller monthly payments over a longer period of time.


Tuition Payments

  • Making annual or semester payments? With a Home Equity Line of Credit, you’ll have the flexibility to utilize your home’s equity tailored when you need to make payments.
  • Paying off other Higher Education Expenses?

If you’re paying off remaining expenses for a masters degree or higher, a Home Equity Loan may be the best option in order to split these expenses into monthly payments.

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Qualifications and Addition Details
Home Equity Loan Home Equity Line of Credit (HELOC)
  • 620 minimum credit score
  • 620 minimum credit score with at least 15% equity in your home
Only allowed to borrow 80% of home equity value Percentage allowed to borrow is flexible and varies per lender

If you do not qualify for either of these options, there are additional opportunities available, including Cash Out Refinance, Reverse mortgage, and personal loans.