A home equity loan is a closed loan, which means you receive a single lump sum that you pay back with regular payments over a predetermined period of time. It is possible to get a fixed rate with a home equity loan.
A home equity line of credit (HELOC) usually features a variable interest rate, but gives you the ability to withdraw money at various times and at various amounts using a check or credit card. Most HELOCs are offered with a specific period during which you can borrow money. To repay, some plans require a minimum monthly payment that includes principal plus accrued interest. However, in some cases, it is possible that the payment toward the principal will not cover the entire loan balance by the end of the term. So at the end of the term, you will still need to continue payments until the principal is completely paid back. Also, it may be required that you will need to pay the entire balance all at once at the end of the term.
If you decide to apply for a HELOC, look for a plan that is best suited to your particular needs. Read the credit agreement carefully, and make sure you understand the terms and conditions, as well as the APR (annual percentage rate) and the costs of setting up the plan.
