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Home Equity Line of Credit (HELOC) vs. Home Equity Loan

Home Equity Line of Credit (HELOC) vs. Home Equity Loan

Do you need cash to finance a large home improvement project, pay off credit card debt, or cover the cost of college tuition? Home equity loans and home equity lines of credit (HELOCs) allow you to leverage the equity in your home to pay for large expenses like these and offer you financial flexibility. Both have their advantages, and it’s important to understand how each option works before making a decision.

What’s the Difference and Which One Is Right for You?

Home equity loans and HELOCs are often called “second mortgages” because they allow you to borrow against the value of your home beyond what you already owe on your primary mortgage. There are important differences, though, and which one is right for you will depend on your situation.

Home Equity Loans

Home equity loans work much like traditional loans. The lender gives you a one-time lump sum of money, which you are responsible for paying back over time. But since you’re using your home as collateral, home equity loans can be a bit easier to qualify for than other loans. They also typically carry fixed interest rates, which means your monthly payments remain the same throughout the life of the loan.


  • Home equity loans are ideal for big, one-time expenses (like paying a contractor for a remodel or home addition).
  • Fixed monthly payments make budgeting easier.


  • You may end up owing more than your home is worth if your property decreases in value.


A HELOC operates less like a personal loan and more like a credit card. Instead of a one-time lump sum of money, a HELOC offers you a revolving line of credit—money you can borrow from whenever you want up to a certain amount (your credit limit). Like with a credit card, you only have to pay interest on the amount you actually borrow.

Many people prefer HELOCs to home equity loans due to their flexibility, but you should only consider a HELOC if you have experience using credit cards responsibly.


  • A HELOC allows you to borrow only what you need, when you need it, and you only pay interest on the amount you actually draw.
  • They’re ideal for multiple smaller, less predictable expenses (like more minor home improvements or repairs).


  • Variable interest rates make payments unpredictable (though some lenders, like Valley Credit Union, also offer fixed-rate HELOCs).
  • HELOCs require more discipline (and often better credit to qualify) than a home equity loan.

Consider a Home Equity Loan or HELOC from Valley Credit Union

At Valley Credit Union, we put our members first. We’re here to learn about your needs, listen to your concerns, and find the best solution and plan for you.

Here are just a few reasons to choose Valley Credit Union:

  • Better loan rates without hidden fees
  • Variable or fixed rates to meet your needs
  • Security and dependability, with personal account monitoring and SSL Web Encryption
  • Skip-a-Payment program offers flexibility and relieves stress

Ready to get started? Have questions?

We can help you understand all your options and decide whether a home equity loan or HELOC is right for you. Then we’ll work with you step by step as you apply for and pay off your loan or line of credit.

We’re all about our community and members, and we’re here to help you meet your goals. Contact us today to get all your questions answered and get started.

About the Author

 Justin Roberts, Vice President of Lending

Justin Roberts is our Vice President of Lending and has been in the financial industry for over 18 years. He is an Oregon State University Graduate and has just completed Western CUNA Management School. When he is not focused on helping the members at Valley, you will find him coaching his two sons and volunteering his time to help develop the youth in our communities through sports.

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