Home Equity Fixed-Rate Loan Vs. Line Of Credit

Which type should you choose?

The answer to this question is seldom black and white. But there are some scenarios where the choice is obvious.

Example 1-Fixed Expense
Your daughter has finally decided to get married and you need $7,000 to pay for the wedding next month. You also don't want the roof of your house to leak during the reception. And you need $3,000 to fix your roof, which will take a week. You know exactly how much you need and both amounts are due in full fairly quickly. If you don't have plans to borrow again, a straight Home Equity Loan for $10,000 is more suited to your purpose.

Example 2-Ongoing Expenses
Your son has decided to pursue a higher education; you'll need to pay tuition at the beginning of each semester for the next four years (hopefully). At the same time you've decided to remodel his room into the den you have always wanted (a project that may never end). A Line of Credit is the better choice. It gives you the flexibility to borrow only the amount you need, when you need it. And if you borrow relatively small amounts and pay back the principal in a reasonable amount of time, a line of credit can cost less than a fixed rate home equity loan. Home Equity Loans can be used to achieve almost any financial goal. Knowing which one you need helps you make the right decision. Talking to a credit union representative can make it a reality.