Differences Between Home Equity Loans and a Line of Credit
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The average American home has grown 45% in value from 2019 to 2022. With so much equity sitting on these properties, some homeowners are looking for home equity loans or lines of credit (HELOCs) to get cash for a large expense.
Home Equity Loans and Line of Credit Differences
A home equity loan is also called a home equity installment loan, second mortgage, or equity loan. This is consumer debt, where the borrower gets a loan against their home's equity. The equity in your home would be the difference between the mortgage and what the home is currently worth.
Alternatively, a HELOC allows you to consolidate or use debt to pay a significant expense. You are also borrowing against the equity in your home, but you have a draw period during which you can borrow as much or as little as you need.
Both loans are similar, except home equity loans are fixed rates and provide the money in one lump payment. HELOCs, on the other hand, are revolving credit lines with variable fees.
Unlike Simple Fast Loans installment loans, which don't require your property as collateral, you could lose your home if you fail to repay either of these home loan options.
Home Equity Loan Pros
Home equity loans can be offered in large amounts of over $200,000. In addition, home equity loans usually have lower rates than other personal loans. You can borrow a home equity loan from any mortgage company, bank, or credit union.
They are optimal to use as a down payment for a second home or an investment property.
Home Equity Loan Cons
While their rates are historically low compared to personal loans, home equity loans tend to have higher fees than HELOCs, and they are fixed. In today's economy, with rising rates, this could lock you into an expensive commitment with no way out.
The application process for a home equity loan can take up to two months, not to mention that the closing costs are similar to those you paid for your primary mortgage. So if you're in a pinch and need a large sum of cash fast and without these fees, you may want to consider an installment or personal loan from Simple Fast Loans instead.
HELOC Pros
HELOCs are a good option for those who want to pull money out for a home renovation. You may also be able to deduct interest paid on a HELOC if you use it for this purpose.
With a HELOC, you can borrow smaller amounts only when needed, keeping your monthly payments in check.
If you pay your HELOC off correctly, it should also help you improve your credit score.
HELOC Cons
Variable payment amounts may be a good option for the disciplined spender, but a HELOC can be as dangerous as a credit card for unsavvy budgeters.
The variable rates work well if national interest rates are on the decline, but they don't do so well in the opposite scenario—you never know what you'll have to pay monthly. HELOCs also require good credit and proof of repayment to be approved.
Additional Loan Options
Many people think their options are limited when getting a loan, but home equity loans and HELOCs are not the only available options. If you need cash fast for a financial emergency, consider one of the following options from Simple Fast Loans.
Installment Loans
Installment loans range from $200 to $3,000 and have flexible loan repayment periods. You can apply within minutes, verify your documents, and receive an instant loan decision.
You'll need a state or federally-issued ID and an active checking account in your name to apply. This checking account should be where your income is deposited so that you can show proof of funds in the future to repay the loan. All types of credit are welcome to apply.
Personal Loans
Finally, you may consider a online personal loan from Simple Fast Loans. These loans are paid off in installments over a predetermined period of time, and you never have to put your property up as collateral. They can be used for emergency medical, repair, travel, or other unanticipated expenses ranging from $200 to $3,000.
The Benefits of Simple Fast Loans
Simple Fast Loans offers ways to get cash fast for financial emergencies. You won't have to put up any of your property as collateral, giving you peace of mind as you pay for your expenses quickly and without worry.
Unlike home equity loans and HELOCs, there are no closing or hidden fees, and everything is disclosed upfront. As a result, you won't have to go through a lengthy application process or wait days for your loan decision. Simply put, Simple Fast Loans will never sell or share your information with others.
Get Your Loan Today
Home equity loans and HELOCs are traditional loan options that may work for some. Still, their high fees, lengthy application processes, and detailed requirements make it difficult for anyone to apply.
At Simple Fast Loans, we're here to offer untraditional loan options to those who need money fast and without a hassle. So, reach out today to get a loan decision instantly!
