What’s The Difference Between HELOCs and HELoans?

Your home can be more than the place you love. It can also be a financial tool that helps you take on projects, cover major expenses, or handle surprise costs with confidence. Two of the most common options are a Home Equity Loan and a Home Equity Line of Credit. They both use the equity you’ve built in your home, but they work in different ways and fit different needs.

This article discusses how each option works, what makes them unique, and the types of situations where one might be a better fit than the other. With a clearer picture, you can choose the path that supports your plans and puts your home’s value to work.

What is a Home Equity Loan?

A Home Equity Loan (often called a HELoan) lets you borrow a fixed amount of money based on the equity you’ve built in your home. It works much like a traditional loan, giving you predictable payments and a set payoff timeline.

Key features:

• Lump-sum funding: You receive the full amount upfront.

• Fixed interest rate: Your rate doesn’t change over the life of the loan.

• Set monthly payment: Easy to plan for and budget around.

• Defined repayment term: Know exactly when the loan will be paid off.

A HELoan can be a good fit if you:

• Have a large, one-time expense such as a remodel or medical bill.

• Prefer fixed monthly payments.

• Want a clear payoff schedule.

In short, a Home Equity Loan offers structure and predictability for big, single-purchase needs.

What is a HELOC?

A Home Equity Line of Credit (HELOC) gives you flexible access to your home’s equity as you need it. Instead of taking one lump sum, you draw funds over time, much like using a reusable credit line.

Key features:

• Revolving credit line: Borrow, repay, and borrow again during the draw period.

• Variable interest rate: Your rate may change over time.

• Flexible withdrawals: Take only what you need, when you need it.

• Interest-only payments during the draw period: With many HELOCs, you only pay interest at the beginning.

• Repayment period: Once the draw period ends, the remaining balance is converted into a repayment period, where the loan is fully amortized and you make regular principal-and-interest payments until it’s paid off.

• Timeline: A HELOC follows a clear timeline, typically with a 10-year draw period and a 10-year repayment period, so you always know the full payoff window, even though the amount you owe depends on how much you use.

A HELOC can be a good fit if you:

• Have ongoing or unpredictable expenses, like phased home improvements.

• Want the option to borrow in smaller amounts over time.

• Prefer access to funds in case of emergencies or irregular costs.

• Like the idea of only paying interest on what you actually use, there’s no cost to simply keeping the line open.

A HELOC offers more flexibility than a HELoan, making it useful for evolving projects or financial cushioning.

Key Differences Between a HELoan and a HELOC

Both options let you tap into the equity you’ve built, but they work differently. Here’s a simple side-by-side comparison to make the choice clearer:

Home Equity Loan (HELoan):

• Structured as one lump-sum loan

• Best for single, clearly defined expenses

• Fixed interest rate

• Fixed, predictable monthly payments

• You receive all funds upfront

• Repayment begins right away with full principal-and-interest payments

• Lower flexibility since the amount and terms are set at closing

Home Equity Line of Credit (HELOC):

• Functions as a revolving line of credit

• Best for ongoing or unpredictable expenses

• Variable interest rate

• Monthly payments vary based on rate and how much you borrow

• Withdraw funds only as needed

• Often interest-only during the draw period, then converts to full repayment

• High flexibility: borrow, repay and borrow again as goals evolve

A HELoan gives you stability when you know exactly how much you need. A HELOC gives you flexibility when your plans or costs may change over time.

What to Consider Before Borrowing Against Your Home Equity

Using your home’s equity can open doors, especially when you pair it with a clear plan and the right information. Before you apply for a HELoan or HELOC, it helps to walk through a few key points so you feel confident in your decision.

Your repayment plan

Home equity products use your home as collateral, so it’s important to choose a payment that fits comfortably within your monthly budget. Our calculators can help you explore different payment scenarios and see what works best for your financial situation.

How you plan to use the funds

Think about how the loan will support your goals. Projects that build long-term value (like home improvements or consolidating higher-interest debt) tend to maximize the impact of your equity. Using a calculator or simple cost comparison can make it easier to map out the benefits and decide whether now is the right time.

The type of product that fits your needs

Think through:

• Whether you prefer fixed payments (HELoan) or flexible access (HELOC).

• How often you expect to draw funds.

• Whether you want predictable costs or are comfortable with a variable rate.

Interest rates and overall costs

Compare rates, fees, closing costs, and repayment timelines. Even with competitive rates, it's helpful to understand how the full cost of borrowing plays out over time. Click here to crunch the numbers with our calculators.

You Can Do Home Equity

Applying for a HELoan or HELOC with Westerra is simple, and you can start whenever you’re ready. Here’s the quickest way to move forward:

How to Apply

You can start your application online. The process is straightforward and knowing what to expect can help things move faster. Be ready to provide:

• Recent pay statements or proof of income

• Homeowner’s insurance information

• Details about your property

• Your current mortgage information (if applicable)

Once you begin, our system walks you through each step and helps you choose the option that fits your goals. If you have questions along the way, our team is here to support you.

Check Today’s Rates

Before you choose a product, take a look at our current rates. This can help you compare your options and understand what your payment could look like.

Need Help First?

If you’d like someone to walk you through the process, our team is always happy to help. You can reach out, visit a branch or talk with us about which option fits your goals best.

Your home equity is more than a number on a statement. It’s a resource you can use with confidence, and you have the tools to put it to work in a way that moves you forward. You’ve got this.

Click here to learn more about using your home equity.

Frequently Asked Questions About Home Equity

What documentation do I need for a HELoan or HELOC?

You’ll typically need recent pay statements or proof of income, homeowner’s insurance details, information about your property, and your current mortgage details. Additional documents may be requested depending on your situation.

How can I estimate how much equity I have in my home?

You can get a quick estimate using the home equity calculator on our website. It helps you understand your home’s value, your remaining mortgage balance, and how much equity may be available: https://www.westerracu.com/home-equity-calculator

How long does the home equity loan process take?

Timelines vary, but many applications are completed within a few weeks. Factors like your documentation, appraisal needs, and underwriting can influence the pace.