A home equity installment loan is ideal if you want a large lump sum of cash for a one-time expense, such as a specific home improvement project, or if you want to consolidate debt. With a home equity installment loan, funds are received in a lump sum and paid back over a set period of time at a fixed interest rate.
A home equity line of credit (HELOC) may be perfect if your expenses will be staggered over a period of time. HELOCs also are useful to have available in case of home repair, medical expenses or some other unexpected event. A HELOC lets you borrow money as you need it and in the amount you need up to a pre-determined limit. A HELOC has a variable interest rate based on the published Wall Street Journal Prime Rate. One benefit of a HELOC is that you are only charged interest on the amounts withdrawn against the credit line. In addition, as you pay the balance of the line down, you can continue to borrow against it up the credit line amount throughout the draw period.