Todd Shaull

Mar 28 2016

What’s the Difference Between a Home Equity Loan and Home Equity Line of Credit (HELOC)?

Home Equity Loan Home Equity Line of Credit HELOC

Do you own a home and need extra money? Whether it’s home improvements, consolidating debt, paying for your child’s education, buying a new car, or funding a family vacation, home equity loans or a home equity line of credit (HELOC) offer an excellent way to borrow money. By taking advantage of the equity in your home, you’ll gain access to funds while taking the advantage of lower interest rates and potential tax savings.

So what’s the difference between a home equity loan and a home equity line of credit?

  Home Equity Loan   Home Equity Line of Credit (HELOC)
What’s the difference between a HELOC and Home Equity Loan? A home equity loan is a loan with fixed payments and a fixed maturity date that uses the equity in your home, and works similar to a vehicle loan. A home equity line of credit is a flexible line of credit, similar to a credit card, which utilizes the equity in your home.
What are the advantages? You have equal monthly payments
based on your original loan amount and term.
With the HELOC, you can borrow money at any time, for any reason, up to your available credit limit. You are able to pay down the line and draw off of it again as needed with the option of paying interest only when there is an outstanding balance.
What are the typical uses of each of these loans? The Home Equity Loan is primarily used for purchases requiring one lump sum, and can be used to finance nearly anything. Often, it is used for home improvement or debt consolidation. Since the HELOC allows you to borrow as your expenses occur, it can be used to finance nearly anything.  Often, it is used for long-term home renovation projects.
If I need more money, do I need to re-apply? Since funds are dispersed as a lump sum, you would need to reapply for additional money. No, unless you are requesting to increase your line of credit.


Home equity loans are an agreement to use your home as collateral for a potentially lower interest rate. Keep in mind, if you default on the loan, your home is at risk, so it’s important to borrow wisely. We also recommend seeking advice from your tax professional to make sure you would qualify for tax savings.

If you’re interested in learning more about home equity loans or a home equity line of credit, please contact a Personal Banker at any Hills Bank location or complete this form. We’ll be happy to answer any questions you may have.

Todd Shaull

About Todd Shaull

Todd Shaull is a Vice President, Branch Manager at Hills Bank’s Cedar Rapids location on Williams Blvd. Todd has been at Hills Bank since 1999 helping customers with checking and savings accounts, consumer loans, auto loans, and home equity loans. Todd can be reached at

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