The Differences Between a HELOC and Home Equity Loan

If you own your home and need to borrow money, a Home Equity Line of Credit (HELOC) or Home Equity Loan are great options. You are essentially borrowing your own accumulated housing wealth with either option, however there are some differences. Based on your needs, one option may be a better choice than the other. Making the best decision comes down to what you are needing to borrow the money for and the timeline you are most comfortable with for paying it back. Here are some of the key differences between Home Equity Loans and HELOCs:

Home Equity Loans:

  • You are getting a lump sum
  • Knowing exactly what to expect for the monthly payment makes it easier to budget for
  • One drawback is that borrowing a large amount of equity in your home can work against your property value decreases


  • A HELOC works like a credit card – you only borrow what you need.
  • Your payment is based on what you use (borrow).
  • Ideal when there is a need to borrow over a long period of time (ex: education expenses or home renovation projects)
  • HELOC are often used as an emergency “savings” fund – you have it if you need it (think new roof or busted pipe).

Which is best for you?

If you are needing to borrow money for a short-term expense, you may want to go with a home equity loan. Learn more about home equity loans here. If you are planning multiple home renovation projects or trying to finance education costs, a HELOC may be the best option. If after weighing the pros and cons you are still undecided, our current promotion on HELOCs could be your tiebreaker.