Hashing out the Differences Between a HELOC and Home Equity Loan

August 31, 2022

Man and woman walking up to house

According to the latest data from the New York Federal Reserve, in the first quarter of 2022 total home equity increased by $1.6 trillion from the previous quarter, the largest quarterly increase since the Great Recession of 2008. This has led many homeowners look for ways to tap into their home’s equity for things like home improvements, debt consolidation, and investment properties.

While many recognize both home equity loans and home equity lines of credit (HELOCs) are available, not all are aware of the differences between the two and which is best for their specific needs. To help, the personal loan experts at BayFirst have created the below HELOC vs. Home Equity Loan cheat sheet to use when you’re ready to maximize the value of your home to tackle your next project or cover an expense.

Both HELOCs and Home Equity Loans:
  • Can be used when the value of your home exceeds the amount you owe on it.
  • Allow you to borrow up to roughly 85% of your home’s equity.
  • Have better interest terms than other personal loans because you are using your home as collateral.
  • Provide funds that can be used for various purposes, including consolidating debt and making home improvements.
  • Could result in you losing your home if you cannot make payments.
Home Equity Loans:
  • Give you a lump sum up front.
  • Come with fixed payments and a fixed interest rate for the life of your loan.
  • Are best for one-time purchases.
  • Do not provide access to additional funds in case of emergency.
  • May have higher rates than HELOCs because you are paying for the predictability of a fixed rate.
  • Allow you to tap into your home’s equity as needed and over time up to a certain credit limit.
  • Come with variable interest rates and variable minimum payments which will change based on credit improvements or fluctuating market rates.
  • Allow you to withdraw funds from your credit lines as long as you make interest payments.
  • Allow borrowers to draw money as they need it and in case of emergency.
  • Have an interest-only payment option.
Still unsure which route to take? Talk to an expert before tapping into your home’s equity. Based on the purpose of the loan and your financial situation, they can help you decide which option is right for you or if there are other personal loans to consider instead.

Help us prevent spam



Equal Housing Lender Better Business Bureau Accredited Business Member FDIC

© 2024 BayFirst National Bank, Member FDIC, Equal Housing Lender
NMLS ID 806183 | NMLS Consumer Access

Bay First Financial
700 Central Ave St Petersburg FL 33701

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.

What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.

Zelle and the Zelle related marks are wholly owned by Early Warning Services, LLC and are used herein under license.

You are now leaving the BayFirst website. By clicking the 'OK' button below, you will enter a different website created, operated and maintained by a private business or organization. BayFirst is not responsible for the content, views, or privacy policies of this website. We take no responsibility for any products or services offered by this website, nor do we endorse or sponsor the information it contains. In addition, websites may change location, ownership and address frequently. BayFirst is not responsible for the accessibility of this link. Would you like to continue?