|
|
| *Loan,banking and credit>>>credit line |
Please explain the difference between a home equity loan and a home equity line of credit? |
Why choose one over the other? Both loan use a mortgage (usually a second mortgage) as collateral. A Home Equity Loan is a fixed term, fixed amount loan. Example: You borrow $25,000 for 10 years. The rate may be variable, but is more commonly fixed. So $25,000 for 10 Years at 8% interest, your payment would be $303.02 per month for 120 months. At the end of the 10 years the loan is paid in full. A Home Equity Line of Credit (HELOC) is a revolving account like a credit card. You get a specific limit, say $25,000 and you can draw on it and pay it back and borrow again. You commonly will get either a credit card and/or a check book to access the funds in your account. The draw/borrowing period is usually 120 months... payments can be interest only or 1/120 of the principal plus the applicable interest. If there is a balance owed at the end of the draw period, the lender will either write a new loan or HELOC. Interest is almost exclusively floating rate, usually tied to the prime rate. Hope this helps. Source(s): 20+ years credit professional Loan-you get a check for X amount and you have to pay it back in installments Credit-works like a credit card, except you write checks against your limit. A loan is a set amount that you pay off in time. With a line of credit you can borrow and much or as little as you need. A loan is a fixed amount that is taken out using the equity in your home. A line of credit is an amount that you can borrow from for a set time period to do repairs or other home improvements. You could get this loan for $25,000 and then only use $5,000 and the rest of the $20,000 would be sitting in an account for you to use should you need it. You choose the one that best fits your needs. If you need a fixed amount that you will use all at once or something that you can use a little here or there. loan = one lump sum line of credit = you draw against the account as needed, and credit becomes availible to you as you pay back the principal you borrow |
| Tags |
| credit application credit bureau credit check credit counseling credit debt credit line credit repair credit report credit score credit card online bad credit loan |
SiteMap--Copyright/IP Policy--Contact Webmaster For personal non-commercial use only. |