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Line of Credit or Home Equity Loan?
Find the right financing solution to meet your needs. Depending on your situation a line of credit or home equity loan may serve you better.
Whether you're looking to finance a kitchen upgrade, finish a basement suite for some extra income, pay off some high-interest credit cards or pay for a family member's education, you may be considering whether you should get a home equity loan or use a line of credit.
Both financing options allow you to tap into the biggest investment you've made - your home equity - to support your current goals and plans. Here are some of their key features and differences.
Lines of credit will generally have an interest rate that is tied to the prime rate (eg +3%, -0.5%).
If prime rates go down, your payment could go down; however, if prime rates go up, the amount you owe each month will also go up.
A line of credit will often have minimum payment, based on balance, so the amount due each month may differ.
Often, lines of credit are secured to the property to enhance the interest rate, especially on larger loans.
Most businesses use lines of credit to smooth out erratic cash flows, bridging the timing gap between incoming revenues and and outgoing expenses.
With a fixed interest rate, you can be confident that you can avoid monthly payment shock as market rates change.
These rates are often 2 to 3 times lower than credit card rates.
A monthly payment schedule is great for those who might have a hard time sticking to a regular payment on your own.
You'll pay down your loan on an amortized schedule that you know in advance.
Funds can be used for multiple purposes to save money by paying down other debts or expenses like property taxes, renovations or paying for an education or a wedding.
Did you know?
Renovation or construction loans can be done in multiple advances.
Your goals are closer than they appear and a home equity loan can get you to the finish line.
We’re putting our money where our mouth is. Get the lowest rate on your home equity Loan from Capital Direct®, or we’ll give you $500.
