HELOC vs Home Equity Loan: Which One’s Right for You?

Thinking about a kitchen remodel, consolidating debt, or finally building that dreamy backyard oasis? If you’re a homeowner, you might be sitting on a powerful financial tool: your home equity. But when it comes to tapping into it, should you go with a HELOC loan or a home equity loan?

Let’s break it down.

What Is a Home Equity Loan?

A home equity loan (sometimes called a second mortgage or equity loan) gives you a lump sum of money upfront. You’ll pay it back in fixed monthly payments over a set term — kind of like a traditional loan.

Why a home equity loan might work for you:

You know exactly how much you need.
You prefer structured payments.
You’re funding a one-time project (like a roof replacement or wedding).
You want to consolidate multiple high-interest debts into one loan at a lower interest rate.

What Is a HELOC (Home Equity Line of Credit)?

A HELOC, or home equity line of credit, works more like a credit card. You get access to a revolving line of credit based on your home’s equity, and you can borrow as needed during the draw period.

Why a HELOC might work for you:

You want flexibility.
You’re tackling ongoing or unpredictable expenses (like tuition or phased renovations).
You want a line of credit available for emergencies to have peace of mind.

There is also an Interest-Only HELOC option. It's similar to a HELOC but you only pay interest during the draw period. This lets you pay more toward the principal when you can, not every month. If your income varies with seasonal or commission-based work, this could be a good option for you.

HELOC vs. Home Equity Loan: Side-by-Side

Feature

Home Equity Loan

HELOC

Funds

Lump Sum

Borrow as needed

Interest Rate

Fixed

Variable, with an option to lock in a fixed rate

Repayment

Fixed monthly payments

Interest accrued and a portion of the principal

Best For

One-time expenses

Ongoing or variable expenses

So, Should I Get a HELOC or Home Loan?

It depends on your goals! If you’re all about structure and predictability, a home equity loan might be your best bet. If you want flexibility and access to funds over time, a HELOC could be the way to go.

No matter which path you choose — HELOC versus home equity loan — you’re taking a powerful step toward your goals. And that’s something to celebrate.

Let’s Make It Happen — Together

At Summit Credit Union, we’re all about helping you make confident financial choices. Use our free and easy home equity calculator to get an estimate of your potential loan amount. Whether you’re leaning toward a HELOC or home equity loan, we’ll walk you through the options and help you find the perfect fit.

Still have questions? You can learn more about a Summit Credit Union or with an expert to talk through your options.

Then, a low standard variable rate (as low as 6.25% APR) after that. Plus, get approved online in 10 minutes to get you moving fast toward your goals!

Already have a HELOC? Refinance with Summit and save — starting with 0% for the first three months!