Is a home equity loan better than a HELOC?

Homeowners looking for alternative financing may want to consider forgoing traditional credit options Credit card And personal loan And investigate their home equity options instead. using a Home equity loan or a Home Equity Line of Credit (HELOC)Homeowners can pay for major expenses and home repairs, often at lower interest rates than other credit options.

Both home equity loans and HELOCs have their pros and cons, and what’s right for one homeowner may not be beneficial for another. That said, there are some examples When a home equity loan may be better to use than a HELOC.

If you think you could benefit from using your home equity then explore your options here now.

Is a home equity loan better than a HELOC?

Here are two instances when a home equity loan may be preferable to a HELOC.

When you want a fixed interest rate

In today’s economic climate, any forecast you can add to your budget and personal finances is welcome. Fortunately, a home equity loan can help the borrower with this A fixed interest rate. This will help you plan better to know exactly what to pay each month. And that will protect you from any negative developments in the broader economy and rate environment. When stacked against a HELOC, that usually comes up Variable interest ratesA home equity loan can be a good option for this reason.

Learn more about your home equity loan options here.

When you need a lump sum

A home equity loan is just that – a lump sum withdrawal from your accumulated home equity. So if you know in advance that you’ll need a lump sum (versus the revolving line of credit that a HELOC provides), this may be a better option. Borrowers tend to take out home equity loans for major expenses, medical bills or for significant home repairs and improvements. If it is used for the latter, Your home equity loan may even be tax-deductible If used for an IRS-approved reason.

“Interest on home equity loans and lines of credit is deductible only when the borrowed funds are used to purchase, construct, or substantially improve the taxpayer’s home that secures the loan.” The IRS Explained online. “The loan must be secured by the taxpayer’s principal home or second home (qualified residence) and meet other requirements.”

Home equity loans also have different repayment schedules than HELOCs, which you may prefer. Home equity loans are repaid like a mortgage each month while HELOCs are repaid when the repayment period begins and the credit draw ends.

Bottom line

As with all financial decisions, The choice between using a home equity loan and a HELOC is a personal one. Some homeowners will clearly benefit from using a home equity loan while others may be better off with a HELOC. It helps to familiarize yourself with both types of credit before submitting an application for either. And be sure to shop around to improve your chances of securing the best interest rate and terms. You can easily check your home equity loan options here now online or by using the table below.