There are advantages and disadvantages to both home equity loans (HELs) and home equity lines of credit (HELOCs), making the choice between the two dependent on your unique needs and circumstances.

Amount You Can Borrow

Both home equity loans and lines of credit allow you to borrow up to 100% of the equity in your home. In some cases, lenders will even allow you to borrow up to 125% of your home equity.

Qualifying Requirements

Both HELs and HELOCs require you show proof of the following:

                * personal income;

                * ownership of the home ownership (ie. Title);

                * current mortgage;

                * current value of the home (via a professional appraisal).

A home equity loan additionally requires proof that at least 20% of the home’s value has already been paid off. So, if you have yet to pay off at least that much of your home’s value, then your choice of which instrument to apply for is made for you.

Purpose for the Money

If you wish to use the money borrowed in a lump sum for a single, one-time expense (ie. a particular renovation, an emergency, a desired purchase, or to consolidate debt), then a home equity loan may be the better choice.

If you don’t have a single, particular use for the money in mind and don‘t think you‘ll need the money all at once but rather feel that you’ll be needing it on a periodic basis (ie. for lengthy and drawn-out remodels, medical bills, or college tuition payments that will be made in intermittent sums), then a home equity line of credit may be the better choice.