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What is the difference between a Home Equity Loan and a Home Equity Line of Credit?

  • A Home Equity Loan, aka HELOAN, is a fixed rate loan. It is an installment and a closed end loan. You choose the term of the loan and once the loan is paid in full, the loan would be automatically closed.
  • A Home Equity Line of Credit, aka HELOC, is based on a variable rate. The term is 20 years with the first 10 years being the draw period and the remaining 10 years being a repayment period. The Line of Credit is a revolving and an open end loan. Similar to a credit card, the minimum payments due are interest only and you would only pay interest if you carried a balance. Members are able to draw, pay back, and continue to use the Line of Credit (given the availability) within the first 10 years. Unlike the Home Equity Loan, the balance of a Line of Credit can be paid in full and remain open, unless requested to be closed by the borrower. If there is a balance at the end of 10 years; the balance will be divided amongst the repayment period.