Home Equity Loan vs HELOC: What's the Difference?

Could using a home equity loan be better than a home equity line of credit (HELOC)? Both are options for homeowners but which one is best? Robert Rico explains what a home equity loan and a home equity line of credit are to help you understand the difference.
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What is the difference between a home equity loan and a HELOC? There's a pretty big difference between the two so let's get into it.

A home equity loan is a specific lump sum of money that leverages your home's equity. For example, if you know you need $5,000 to install a pool in the backyard, then you can take out a home equity loan of $5,000 to make that happen.

What makes a home equity loan different from a HELOC is this: if you choose a HELOC, you can add more money to that lump sum, like a credit card. For example, if you install a pool for $5,000 but you realized that a jacuzzi is the perfect compliment to your backyard and you will need an additional $2,500, then you can tack that expense on top of the initial purchase. Consider a HELOC like a credit card. You can use it to make big purchases like a pool or a jacuzzi while leveraging your home's equity.

That's what makes equity such a powerful tool to finance big purchases in life. Some people will even use their equity to buy another property that they can rent out to earn passive income. Isn't that something? There's a lot of power in the HELOC and home equity loan. Now you know!

Chapters:
00:00 - What is Equity?
00:51 - Should you use a home equity loan or a HELOC?
01:00 - What is a HELOC?
02:19 - What is a Home Equity Loan?
03:29 - What's the difference between Home Equity Loan and HELOC?

#HomeEquityLoan #HELOC #RealEstateFinance

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