What Is a Home Equity Loan (HELOAN)?
A Home Equity Loan, or HELOAN, allows you to borrow a lump sum using the equity in your home as collateral. Unlike a Home Equity Line of Credit (HELOC), which gives you a revolving credit line, a HELOAN provides one fixed amount up front, repaid over time at a fixed interest rate.
This loan can be used for a wide range of purposes, such as home improvements, debt consolidation, major purchases, or education expenses. Since it’s a secured loan, the amount you qualify for depends on the value of your home and your existing mortgage balance.
How Does a HELOAN Work
Before applying for a HELOAN, it’s important to understand the basics:
Qualification
You’ll need enough equity in your home, a solid credit score, and stable income. Requirements vary by lender.
Loan Amount
The maximum amount is typically based on your home’s appraised value minus what you owe on your current mortgage.
Fixed Interest Rate
HELOANs usually come with a fixed rate, meaning your monthly payments remain consistent for the life of the loan.
Lump Sum Disbursement
After approval, you’ll receive one lump sum you can use however you choose.
Repayment
You’ll make monthly payments over a set term—usually between 5 and 20 years.
Collateral
Like any secured loan, your home is at risk if you fail to make payments.
Tax Deductibility
Interest may be tax-deductible depending on your use of funds and local laws. Speak with a tax advisor to confirm.
Is a HELOAN Right for You?
A HELOAN can be a smart option if you want a predictable payment schedule and need access to a large sum of money up front. It typically offers lower interest rates than credit cards or personal loans—but it also carries risk. Since your home is used as collateral, missing payments can lead to foreclosure.
Take time to review your budget, compare lending options, and consider speaking with a financial advisor. When used responsibly, a HELOAN can be a powerful financial tool to support your goals.
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