DIY Network

Loan Vs. Line of Credit This DIY Basic brought to you by LendingTree.com explains the difference between a home equity line of credit and a home equity loan.

advertisement

Sponsored By LendingTree.com, Inc.

Features Print Version Email to a Friend Watch the Video Add to My Projects

The Kit Get More Info

In this DIY Basic you'll find out the difference between a home-equity loan and line of credit. No matter which type of loan you choose, most of your research can be done via the online services-- such as LendingTree.com.  WINDOWS MEDIA VIDEO Watch the Video

Life is full of major expenses. College tuition, unexpected and pricey home repairs and medical bills can set you back financially. Well, here's some good news -- if you own your home, consider obtaining either a home equity line of credit or a home equity loan. Both allow you to access funds as you need them.

• Equity is the difference between your home's appraised value and the outstanding balance on your mortage. Even if you've only owned your home for a short time, you've probably created equity, particularly if you made a sizeable down payment.

• A home equity line of credit is a form of revolving credit in which your home serves as collateral. It basically operates like a credit card. You can borrow up to a certain amount over the life of your home loan, tapping into it as needed. As you pay off the principal, your credit line is replenished.

  A home equity line of credit typically has a variable interest rate that's based on a publicly available index.

• If you need a sizable amount of money at one time, say for a renovation, a home equity loan may be a better choice. You'll be approved for a specific amount and will receive it in one lump sum. A home equity loan typically has a fixed interest rate and is paid back in pre-determined monthly payments over the life of the loan.

• The beauty of both a home equity line of credit and a home equity loan is that interest payments are usually tax deductible. This can be an attractive feature for someone trying to consolidate bills and pay off debt.

• Be sure to consult your tax advisor to review your situation, but before you decide which option is best for you, do your research. There are several sources that can answer questions and walk you through the process, either online or over the phone.

So the next time a major expense comes your way, don't panic -- consider a home equity loan or line of credit.

RESOURCES :

LendingTree.com Information

LendingTree.com, Inc.
P.O. Box 008
15105-D John J. Delaney Dr.
Charlotte, NC 28277
Toll-free: 800-555-TREE (555-8733)
Website: www.lendingtree.com