The Difference Between an Equity Line and a Loan

Home equity loans are offered in various forms, including credit lines. In other words, the
borrower may have the choice to consider home equity loan or line of credit. The equity loans
are offered in one large sum to the borrower to help him pay off debts, reduce high interest on
credit cards, pay off tuition, remodel his home to build equity, and so forth.

Once the borrower agrees to the terms and conditions on the loan, the borrower often receives
money to repay the first mortgage and additional savings to remodel the home, or do what the
borrower intended to do with the money. On the other hand, if the borrower is offered a line of
credit for ten years, at leisure, the borrower can use the credit for any purpose intended by the
borrower. The line of credit allows the borrower to payoff the loan differently from the equity
mortgage loans.

It depends on the lender, but a few have restrictions on the credit lines, meaning that the
borrower can take out the full amount at once or else the borrower can only take out limited
amount. Once the balance is paid in full, then the borrower can take out more credit to use at
leisure; however, some lenders stipulate what the money must be used for, regardless if the
borrower is repaying the debt.

The interest on credit lines are Prime Rates that are not based on a fixed interval. Thus, this
poses a threat to most borrowers. The home equity loans are often fixed rate and deductibles on
taxes may be included. Thus, to decide which option is right for you, you would weigh out the
differences of the terms and conditions, stipulations, APR, interest and other pending costs
involved in loans or credit.