From home improvements and major purchases to debt consolidation, family expenses, and everything in between.
A home equity loan (HELoan) is a loan that typically has a fixed interest rate and is disbursed in a lump sum at the beginning of the loan.
It’s a bit like a second mortgage: you’ll start repaying it immediately through fixed monthly payments. HELoans are secured by your house. This allows you to access larger sums of money at lower rates.
A HELoan is a loan with a fixed rate and fixed monthly payments. It is secured by your home, much like a second mortgage.
Lenders will determine how much you may borrow by considering the amount of equity in your home, your credit score, and your debt to income ratio. A HELoan is disbursed in one lump sum, and you’ll make fixed monthly payments for the duration of your loan.
A HELOC is a revolving line of credit that typically has a variable interest rate. A HELoan is a fixed rate, fixed term loan.
A HELOC is a revolving line of credit that lets you draw against your credit limit as you need to access funds*. Like a credit card, you can borrow and repay up to the credit limit during the draw period. On the other hand, a HELoan is paid out in a one-time disbursement, and you’ll start repaying on the full balance immediately through fixed monthly payments. Ultimately, a HELOC is more flexible while a HELoan is more structured.
For more information on the differences between a HELOC and a HELoan and how you might choose if one of them is the best option for you, visit Prosper’s popular blog article that breaks it all down: HELOC vs HELoan: What’s the difference?
In some cases, home equity loan interest may be deductible, but it’s critical to note that this is a complex issue, so you should talk to a tax professional and check with IRS guidelines before making a decision.
If you have built up equity in your home and you’re looking to finance a specific major expense, then a HELoan could be a great fit for you.
The fact that it’s secured by your home allows you to access a larger total amount at a lower interest rate—and unlike a HELOC, which typically carries a variable interest rate, a HELoan usually comes with a fixed interest rate. This means zero surprises when it comes to your monthly payments, and no temptation to spend beyond your budget.
In most cases, borrowers can choose the term that best suits their needs, with terms up to 30 years.
In general, the longer the term, the lower the monthly payment. On the other hand, shorter terms typically come with lower annual percentage rates (APRs).
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*Eligibility for a HELoan up to $249,999.99 depends on the information provided in the home equity application. Depending on the lender, HELoans may require an in-home appraisal.
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