Key Differences Between Home Equity Loans and HELOCs

A home equity loan is a form of second mortgage that allows you to borrow money based on the value of your home, using your home as collateral. On the other hand, a home equity line of credit (HELOC) allows you to draw against an approved limit and typically comes with variable interest rates.

Warning Signs to Watch Out For

When considering a home equity loan, be on the lookout for red flags like lenders who suddenly change the terms of the loan or approve payments that you know you can't afford. These can indicate potential issues with the lender or the loan itself.

Exploring Alternatives to Home Equity Loans

If a home equity loan doesn't seem like the right fit for you, there are alternative options available. Cash-out refinancing allows you to replace your existing mortgage with one that pays off the mortgage and gives you extra cash. Another option is a reverse mortgage, which is tailored for homeowners aged 62 or older and allows you to gradually deplete your equity and receive monthly payments.