A Home Equity Loan (HELOAN) is a fixed-term loan that allows you to borrow a lump sum of money using the equity in your home as collateral. Unlike a HELOC (which works like a credit line), a HELOAN gives you the entire loan amount upfront and you repay it in fixed monthly installments over a set period—usually 5 to 30 years.
Benefits of a HELOAN:
- Fixed Interest Rate: Your rate stays the same for the life of the loan, making payments predictable and easy to budget.
- Lump Sum Funding: Ideal for large one-time expenses like major renovations, debt consolidation, or big purchases.
- Lower Rates than Unsecured Loans: Because your home secures the loan, rates are typically lower than personal loans or credit cards.
- Potential Tax Benefits: Interest may be tax-deductible if used for qualifying home improvements (check with a tax advisor).
- Boost Home Value: When used for upgrades, a HELOAN can improve your property’s worth and increase equity.
- Set Repayment Schedule: No surprises—your payment amount and payoff date are fixed from the start.
If you want, I can also make a side-by-side HELOAN vs. HELOC comparison chart so clients can quickly see which option fits them best. That would make your loan product explanation more powerful.
Feature | HELOAN (Home Equity Loan) | HELOC (Home Equity Line of Credit) |
How You Get the Money | Lump sum, all at once | Withdraw funds as needed during draw period |
Interest Rate | Fixed for the life of the loan | Variable (can change over time) |
Monthly Payment | Fixed payment amount | Payment varies based on interest rate and amount borrowed |
Best For | Large one-time expenses (major remodel, debt consolidation) | Ongoing or unpredictable expenses (home projects, tuition, emergencies) |
Repayment Term | Fixed term (5–30 years) | Draw period (usually 5–10 years) followed by repayment period |
Flexibility | Less flexible—full loan amount starts accruing interest immediately | Highly flexible—borrow only what you need, when you need it |
Predictability | Stable payments, easy to budget | Payments can fluctuate with interest rate changes |
Typical Interest Rate | Slightly higher than initial HELOC rate, but fixed | Often starts lower, but can increase |
Potential Tax Deduction | Yes, if funds are used for qualifying home improvements | Yes, if funds are used for qualifying home improvements |
Risk | Your home is collateral | Your home is collateral |