The short answer

A home equity line of credit, or HELOC, generally gives you a revolving credit line that you can draw from, repay, and potentially use again during its draw period. A home equity loan generally delivers one lump sum that is repaid on a set schedule.

A HELOC can fit projects with uncertain or staged costs. A home equity loan can fit a known, one-time expense when a more predictable payment structure matters. The right answer depends on the available program, your timing, your tolerance for payment changes, and the total cost—not only the opening rate.

How a HELOC usually works

A HELOC is secured by your home and is often structured with a draw period followed by a repayment period. Many HELOCs have variable rates, which means the rate and payment can change. Minimum draws, annual fees, early-closure fees, and draw-period rules vary by program.

  • Best suited to expenses that may happen in phases
  • Interest is generally charged only on the amount drawn, subject to the loan terms
  • Available credit can provide flexibility, but it also requires spending discipline
  • A changing rate can change the monthly payment

How a home equity loan usually works

A closed-end home equity loan typically provides the proceeds at closing. Repayment begins on the full balance, and the payment schedule is defined in the loan documents. Depending on the product, it may offer a fixed-rate structure, although availability and terms vary.

  • Best suited to a known cost or one-time use
  • One disbursement makes the amount easy to budget
  • A predictable payment may be available with some programs
  • You begin paying on the full amount rather than only on future draws

Questions to compare before choosing

Ask for a side-by-side review that includes the payment today, how the payment could change, closing costs and fees, draw rules, prepayment or early-closure provisions, and the total amount repaid under reasonable scenarios. Also compare the new secured debt with the debt or expense it will replace.

Neither product turns equity into free money. Both place a lien on your home, and missed payments can put the property at risk. A clear purpose and a realistic repayment plan should come before the product choice.