If you need to borrow against the equity in your home, two options include a lump sum home equity loan, and a home equity loan of credit (HELOC).
There is a difference between how these two financing products are disbursed. You receive a lump sum home equity loan all at once. But a HELOC is a line of credit. You can borrow from it as needed up to the HELOC limit.
Neither a lump sum home equity loan nor a HELOC is inherently “better” than the other. Which one is most suitable depends on your individual scenario. To help you figure out which to choose, let’s go over situations where it would make sense to pick a lump sum equity loan or a HELOC.
Consider a Lump Sum Home Equity Loan If …
- You have a specific purpose in mind for the money, particularly a large expense. You can borrow the entire amount all at once. This is ideal for larger purposes such as buying a new vehicle, paying off a high-interest debt, or making a big improvement to your home.
- You want a fixed monthly interest rate and predictable, consistent payment amounts. This is more common with lump sum home equity loans than it is with HELOCs.
Consider a HELOC If …
- You want a flexible form of financing where you can use just what you really need, and no more than that. The benefit of doing it this way is that you only have to pay interest on what you use, which can keep your overall costs down compared to a lump sum.
- You are not sure how much you need to borrow, and just want a flexible option available to you. Perhaps, for example, you are planning a renovation. But you are not positive what direction you will go with the project. Since your needs may evolve, a line of credit may be more suitable than a lump sum.
- It does not bother you if your interest rate might increase over time (there are fixed rate HELOCs, but many HELOCs feature variable interest rates).
- You just want a line of credit you can tap into if necessary. You might not even have a specific project in mind at all. You could just want a little more financial liquidity in your life in case an emergency bill comes up, or some other unexpected or unusual expense.
Apply Now for the Flexible Financing You Need
Liberty Capital makes it quick and easy to apply for a home equity loan or a home equity line of credit.
During your consultation, we can answer your questions about these financing products, and help you figure out which one is ideal for your needs.
To begin, please give us a call at (614) 505-0620 to schedule your consultation. We are based in Columbus, and can connect you with suitable financing throughout OH.
