Home Equity Loan or HELOC?

Home values hit new heights in 2021. In October, the CoreLogic Home Price Index1 recorded the highest increase in its 45-year history of tracking annual home price growth in the U.S. This sharp uptick in market values gives homeowners an opportunity to access a sizeable amount of equity now, instead of waiting years to pay down mortgage principal balances.

If you’re a homeowner, you can borrow against the equity in your home using a home equity loan or home equity line of credit (HELOC) and use the funds for almost any reason. But before you rush to complete a loan application, learn more about how each one might align with your financial goals.

Interest Rates

Home equity borrowing is more affordable than other loan options because your home serves as collateral for the loan. But if you don’t repay the loan as agreed, you could risk losing your home. Since there is less risk to the lender, you have access to low-interest-rate borrowing with both home equity loans and HELOCs. Most home equity loans come with a fixed-interest rate that applies to the amount disbursed after loan approval. The majority of HELOCs have variable interest rates that only apply to the amount borrowed, not the entire credit line.

Cost Savings

Using the equity in your home to pay off lingering high-interest debts could reduce both your stress and the total amount of interest you pay. Homeowners in this situation might choose a low fixed-rate home equity loan equal to their total debt balance to save money. If a home improvement project is a top priority, a HELOC allows you to use as much — or as little — of the line of credit as you need, so there’s no rush to figure cost details before submitting your loan application.


If flexible borrowing is what you need, consider a HELOC. Unlike home equity loans, which disburse in one lump sum, a HELOC works more like a credit card. HELOC users are able to access a pre-approved credit line at any time and only repay the amount they borrow. You can borrow against the line of credit over an extended period as long as repayment is made as required by the loan agreement.

Should I access my equity using a home equity loan or HELOC?

A home equity loan or HELOC might be a good solution to help you avoid the high costs of using credit cards and other types of loans to meet your financial goals. However, the right one for your situation depends mainly on how you intend to use the funds.

A home equity loan might be a better option if you:

  • Have a specific project or financial goal in mind
  • Are prepared to use the funds right now
  • Require a fixed-interest rate that allows for stable monthly payments

On the other hand, a HELOC could expand your options, especially if you:

  • Have financial needs with various timelines such as
  • College tuition, multi-phase home improvement projects, etc.
  • Can adjust your budget if loan payments change due to fluctuating interest rates
  • Need a high credit limit with single-digit interest rates

 Most HELOCs have a draw period of 10 years with lower, interest-only payments followed by a fully amortizing repayment period. You need to consider the higher payments that will be due during the repayment period.

 Get Help When You Need It

A home equity loan or HELOC2 lets you access funds to achieve your financial goals without selling your home. Borrow against the equity in your home using a SchoolsFirst FCU zero-origination fee3 Home Equity Loan or Home Equity Line of Credit. Learn more when you request a consultation or speak to one of our loan consultants at 800.462.8328. They’re ready to help you discover which loan option is the best fit for your finances.



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  2. The rate you may qualify for is based on factors including your credit rating and the combined loan-to-value (CLTV) of your property. A minimum credit qualifying score is required. Rates listed are effective as of 01/31/2022and subject to change without notice. Equity loan products are simple interest. This means the amount of interest estimated on the loan is based on the assumption that monthly payments will be made on the precise due date. Any early payments will reduce the final amount due, while any late payments will increase the final amount due. The final amount due may be substantially higher than the amount reflected on the application and must be paid in full on the maturity date of the loan. An approved application is required for a rate to be locked. All loans subject to approval.

Insured by NCUA.     

  1. Some closing costs may be incurred if accommodation recording fees, title charges to clear or transfer liens, or indemnification due to construction on the subject property are required. The borrower is responsible for these costs.





One thought on “Home Equity Loan or HELOC?

  1. Thanks for this interesting article about HELOC and home equity. It’s good to know that you immediately begin repaying interest on a home equity loan. This sounds very beneficial if you want to pay off a loan quickly, or at least in a timely matter.

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