Both types of home equity loans offer homeowners unique benefits. Most homeowners decide which options they want based on the desired interest they want to undertake.
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Find out Which Home Equity Loan is Right for You

Now that you have gotten your facts straights, it is the time to learn about types. There are two types of home equity loans available to homeowners. Depending on your situation, you have the opportunity to choose between a standard home equity loan and a home equity line of credit.

Standard home equity loans

A standard home equity loan provides you with a one time lump sum of money. What you initially take out on the loan is what you get. You cannot ask for more money after the home equity loan application is processed. This loan has a fixed interest rate throughout the life of your home equity loan.

When you take out a standard home equity loan, you lock your interest rate through a fixed interest rate contract. This means that the interest rate on your home equity loan will remain constant throughout the life of your home equity loan. This is a great option for people who can find a competitive fixed rate and don't plan to sell their home before their home equity loan is paid off.

Home Equity Lines of Credit

Home equity lines of credit are sometimes called HELOCs. A HELOC operates in a manner analogous to credit cards. You can think of your HELOC as a revolving line of credit. Your lender will give you a period of time called a "draw period." During this draw period you can continuously withdraw and pay off any amount of money within the set limits of your loan, similar to a credit card account.

The interest rate at which you take out your home equity line of credit probably won't be the same rate when the life of your home equity line of credit comes to an end. Home equity lines of credit interest rates tend to be lower than fixed rates for standard home equity loans, but HELOC interest rates fluctuate rapidly. Variable interest rates are a good idea for homeowners who plan to sell their home and can thus take advantage of low interest rates in the short run.