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Is there a difference between a Home equity loan & Home equity line of credit? |
Is there a difference between a Home equity loan & Home equity line of credit? The loan is when you actually borrow a specific amount of money. The line of credit is when they set you up to draw out money up to a certain limit. In the second case, you may not actually draw on the line of credit. The end result is the same if you spend the same amount of money. Usually with a home equity loan you get all of the money for your loan transfered to your bank account. Then you start paying monthly payments on the sum. A home equity line of credit is more like a debit card where you only have to make payments based on what you've used. Loan is a lump sum where a check is issued to you for that amount. A line of credit is like a credit card with a limit. Personally, I prefer the line of credit. That way you can maximize the amount you "may" want, but only pay for what you use. You might be able to deduct the interest for both on your income taxes. Check your state laws to be sure. Yes... the loan is the amount you presently owe to the bank and the line is the available that you may receive |
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