When you opt to take out a home equity loan, obviously, you need money; however, you may not know all the available options. Therefore, you are probably questioning which home equity loan is suitable for your situation and how each loan differs from each other.
A home equity loan, which has many benefits such as lower rates of interest and tax deductions, is determined by the difference between the amount of money you still owe on the house and the market value of the home.
When it comes to deciding on a loan, you have two options, a home equity loan, or a home equity line. Either or may be suitable for your specific situation. Let us discuss what each is and how it can benefit you.
With a home equity loan, a loan in which you receive a determined amount of money, in one lump sum. You also have one monthly payment, as well as a fixed rate of interest. After you have paid the entire sum, you have no further debt. This type of loan is perfect for those who have a solid idea of how much money they need and exactly what it is for.
With a home equity line, you are extended a credit line, which is made available to you as you wish, for a predetermined period of time. This is still based on your equity, however, you do not have to use it all. It is basically there when you need it, you take what you need, pay that amount back, and the line of credit will be available to you again.
What is great about this type of loan is that you can take exactly what you need, maybe you do not need to borrow the full amount of equity you have available. You only have to pay back what you use and nothing more. Those who have specific projects going on and really have no idea how much it will cost typically use this type of loan.