Your home is more than a place to live—it’s also one of your biggest financial assets. If you’ve built up equity, tapping into it can be a smart way to access cash for renovations, debt consolidation, or other big expenses.

But here’s where many homeowners get stuck: Should you go with a home equity loan or a HELOC?

Both let you borrow against your home’s value, but they work very differently. Choosing the right one can save you money and stress over time.

What Is a Home Equity Loan?

A home equity loan is a lump-sum loan secured by the equity in your home. It comes with a fixed interest rate and a set repayment schedule—usually 5 to 30 years. You get all the money upfront and start repaying it immediately.

Pros:

• Predictable monthly payments
• Fixed interest rate
• Great for one-time expenses (like a major remodel or debt payoff)

Cons:

• Less flexible
• You pay interest on the full amount, even if you don’t need it all
• Adds a second mortgage to your property

What Is a HELOC?

A Home Equity Line of Credit (HELOC) is more like a credit card tied to your home’s equity. You get access to a credit limit, and you can borrow, repay, and borrow again during the draw period (usually 5–10 years). Interest is usually variable, and you only pay interest on what you actually use.

Pros:

• Only pay for what you borrow
• Flexible draw and repayment periods
• Ideal for ongoing or uncertain expenses

Cons:

• Interest rates can change
• Payments can jump after the draw period
• Risk of overspending if you’re not disciplined

Quick Side-by-Side Comparison

Feature	Home Equity Loan	HELOC
Funds	Lump sum	Line of credit
Rate	Fixed	Usually variable
Repayment	Starts immediately	Interest-only during draw period
Flexibility	Low	High
Best For	Large one-time costs	Ongoing or unpredictable expenses

When to Use a Home Equity Loan

You might prefer a home equity loan if:

• You know exactly how much you need
• You want a predictable payment plan
• You’re consolidating high-interest debt
• You’re financing a big-ticket home improvement project

Example: You’re remodeling your kitchen and the contractor quotes $75,000. You lock in a fixed rate and repay it over 15 years with stable monthly payments.

When to Use a HELOC

You might prefer a HELOC if:

• You want flexibility over time
• You’re unsure how much you’ll need
• You have sporadic expenses (e.g., college tuition, ongoing renovations)
• You want to “pay as you go”

Example: You’re slowly updating different areas of your home. A HELOC gives you access to funds when needed—without interest piling up when it’s not.

Pro Tip: Consider Rate Trends

If rates are high or climbing, a fixed-rate home equity loan offers more peace of mind. If rates are stable or dropping, a HELOC can provide more short-term flexibility and lower initial payments.

The Right Choice Depends on Your Goals

Both home equity loans and HELOCs let you leverage the value of your home to accomplish major financial goals. But the right option depends on how much you need, how soon you need it, and how comfortable you are with interest rate changes.

Want help figuring out which path makes the most sense for your situation? Let’s look at your equity, your goals, and your timeline, then put a plan in place that works for you.