Side-by-side comparison
| HELOC | Home equity loan | |
|---|---|---|
| How funds are paid | Revolving line — draw as needed | One lump sum at closing |
| Rate | Usually variable | Usually fixed |
| Payments | Often interest-only during the draw period, then principal and interest | Fixed principal and interest from the start |
| Interest charged on | The balance you've drawn | The full loan amount |
| Reuse | Yes, during the draw period | No — you'd need a new loan |
| Best for | Ongoing or uncertain costs | One known expense |
Choose a HELOC if…
- Your costs will come in stages, like a remodel or college tuition.
- You want a standby source of funds for emergencies.
- You expect to repay quickly and want to pay interest only on what you use.
- You're comfortable with a rate that can change.
Choose a home equity loan if…
- You know the exact amount you need today.
- You want a payment that never changes.
- You're consolidating debt and want a firm payoff date.
Getting the best of both
Some HELOCs offer a fixed-rate option on part of the balance, giving you the flexibility of a line with the stability of a fixed payment on money you've already drawn. Ask whether that feature is available when you compare offers.
Not sure which fits? Call Matthew at (512) 952-1125 and he'll walk through both with your numbers.
Frequently asked questions
Is a home equity loan the same as a HELOC?
No. A home equity loan gives you a lump sum with a fixed rate and payment. A HELOC is a revolving line of credit, usually with a variable rate, that you draw from as needed.
Which has lower rates?
It depends on the market and the lender. HELOC starting rates are often lower, but they can rise; home equity loan rates are fixed for the life of the loan.
Can I convert a HELOC to a fixed rate?
Some HELOCs allow you to lock a fixed rate on all or part of your balance. Check your program's terms.