Did you know there's also a tax advantage? Unlike almost any other consumer loan type, the interest on a home equity loan or HELOC of $100,000 or less is likely to be tax-deductible ($50,000 if married filing separately).
Home equity loans and HELOCs are two distinct products. With a home equity loan, you borrow a lump sum of money repayable over a fixed term, usually 5 to 15 years, giving you the security of a locked-in rate and a consistent monthly payment.
People tend to use home equity loans for large, one-time expenses like a major home-improvement project. You also might use one to start a business, make a big-ticket purchase, or consolidate high-interest credit card debt. This type of loan makes sense if you don't foresee future borrowing needs.
On the other hand, a HELOC is much like a credit card or any other type of open-ended credit. You can borrow money as needed, up to the credit limit your lender assigns. Just transfer funds from your HELOC to your regular checking or savings account. A HELOC is usually a variable-rate loan, so your monthly payments will change based on your outstanding balance and fluctuations in the prime rate.
A line of credit offers flexibility and ready access to funds, making it ideal for unexpected expenses like large medical bills. A HELOC also can help finance a child's college education, especially for higher-income families who don't qualify for financial aid.
We want to be your home equity loan partner! A Sun Federal Credit Union loan officer can explain which type of home equity loan may work for you. Stop by or call (800) 786-0945 today!