Why choose a home equity line of credit?

Establishing a home equity line of credit before you need one can be an excellent idea. Unlike a standard home equity loan, you won't be paying any interest on the money that's available to you unless you actually use it, and you'll only be paying interest on the amount that you actually borrow rather than on the entire $10,000 amount.

There are a few circumstances where a home equity loan makes more sense than a line of credit. Since standard home equity loans generally carry lower interest rates than a home equity loan of credit, it makes sense to use a home equity loan if you will be paying out all or nearly the entire loan amount in a short period of time. In other words, if you need $10,000 to pay for something up front, then it makes more sense to take out a home equity loan for $10,000. You'll pay less in interest that way.

If, on the other hand, you predict that you'll need about $10,000 to complete a project over the next year, but won't need all of it at once, a home equity line of credit makes more sense. While your interest rate on the line of credit may be slightly higher than on a standard loan, you'll only be paying interest on the amount that you actually owe each month.

Page 2 of 2 :: First | Last :: Prev | 1 2 | Next