A Home Equity loan is a type of loan that allows homeowners to borrow money against the equity in their home. (Equity is the difference between the home’s market value & the outstanding balance of liens on it).

One of the key benefits of obtaining a home equity loan is that you get cash for major expenses (e.g. medical bills, college education, or home improvements) without dipping into your savings.

Types of Home Equity Loans

  • Fixed-Rate Loans

As the name implies, a fixed-rate loan provides the borrower a lump-sum, which has to be repaid within a fixed time-period at an agreed-upon rate of interest. The amount to be repaid & interest rate does not vary at any point of time.

  • Home-Equity Line Of Credit (HELOC)

Home-Equity Line Of Credit (HELOC) is a variable-rate loan, which works much like a credit-card. The borrower is pre-approved for a spending limit & can withdraw cash whenever needed via credit card/special checks. Monthly loan installments are not fixed and vary depending on the amount borrowed & the current rate of interest. HELOC has a fixed term, which means the outstanding amount of the loan must be paid back in full before the loan term ends.