Home Equity Loans vs Home Equity Line of Credit – Which Option Should You Choose?

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Tapping into your home equity loans qualifies you for low rates with
the potential benefit of tax write offs. Lenders have developed a number
of financing solutions for you, each with their own pros and cons. Home
equity loans provide low rates with some closing costs. On the other
hand, a home equity line of credit waives closing costs and application
fees for flexible lending amounts at slightly higher rates.Benefits Of A Home Equity LoanFor those wanting to borrow a large amount for several years, a home
equity loan provides the cheapest financing. By paying closing costs, you
can lock in a low fixed or adjustable rate. You also can select terms
that help you get you a reasonable monthly payment.Home equity loans usually don’t have any limit balances, early payment,
or annual fees. Structured like a regular mortgages, interest is
primarily paid at the beginning of the loan period.Benefits Of A Home Equity Line Of CreditWith a home equity line of credit you can borrow amounts when you need
to with an issued credit card. With a predetermined credit limit, you
have flexibility of when you can draw on funds. So you can pay off the
balance one month, and then borrow a thousand the next.Interest is only paid on the amount you borrow. Usually, the minimum
payment is only the interest charged for that month. Most lenders also
offer the option of converting your line of credit into a second mortgage
when you are ready to make regular payments.A line of credit doesn’t usually have any application fees. But there
may be fees for carry a minimum balance or closing the account early.Choosing The Right Equity FinancingHome equity loans are designed for large lump sum payments, used to pay
off credit card debt or pay for a remodel project. Terms extend for
several years to make the loan payments manageable.Home equity line of credit is best for short term financing. Interest
payments can be kept to a minimum by paying off balances early. Opening
a line of credit also gives you the option of available credit without
having to pay large applications fees.No matter which type of financing you settle on, make sure you compare
several lenders to get the best deal on rates and fees.