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The decision between a line of a credit and an equity loan can be quite confusing. What your needs are will be the most detrimental factor in your choosing process.

If you plan on using the money you receive in a lump sum for a one-time situation such as making a home improvement, consolidating credit card debt, or paying for a wedding, then an equity loan is likely your best choice. Interest rates are fixed, and so are the monthly payments, allowing you to budget correspondingly.

A home equity line of credit, commonly known as a HELOC, may be a better solution for your financial needs if you necessitate money occasionally and not all at once. For example, a home remodeling project often take a long time, resulting in you paying your builder in several draws. Or, maybe you need cash at the beginning of every semester to pay for your child's tuition. A home equity line of credit offers the flexibility to borrow as much as you need, when you want.

Below are a few questions and answers that will help you choose the right loan for your needs. If you have any questions, please contact us. Get more info equity loans vs. lines of credit.

Q: Will receiving the money in a lump sum satisfy my needs? Or will I need several installments?
A: If you are looking for a lump sum, apply for a home equity loans. If you are looking for receiving money in installments, apply for an equity line.

Q: Is the intent of my loan for a short-term or long-term purpose?
A: If you are going to use the money on something that is going to last a long amount of time, i.e. a new pool or automobile, then an equity loan is a better choice. On the contrary, if the money is to be spent on something that will last a short time, like a vacation, wedding, or semester at school, consider applying for an equity line of credit.

Q: How much can I afford for my monthly payments?
A: You will be required to pay principal plus interest every month for the life of your equity loan. An equity line of credit permits you to pay only interest for the first few years of the loan.

Q: How tempting is it going to be use the money from an equity line of credit recklessly?
A: If you have even the slightest concern that careless spending may occur, then consider applying for a home equity loan since you will be paying off the principal and interest over time, and you won't have access to a revolving line of credit.

Q: Am I going to be bothered by a variable rate?
A: The interest rate associated with almost every type of equity line is going to change every time the Federal Reserve raises or lowers the federal funds rate. If an adjustable rate mortgage bothers you, then consider equity loans with fixed rates.

You can learn more about the different equity loan/line types we offer. If you have any questions, please contact us.



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