A home equity loan is a debt on your home.  The other kind of debt that you can have on your home is a home equity line of credit.
 Difference between home equity loan and home equity line of credit (HELOC)
A home equity loan is a fixed sum that is given in lump sum at the beginning.  A fixed interest is charged for using this sum.  Repayment of this sum is done in equal monthly payments over a fixed number of years.  No further borrowing can be done against this loan.  In some states, tax deductions are also allowed for such loans.
 

A home equity line of credit (HELOC) is a revolving credit like your credit card.  A HELOC allows you to borrow money as and when you need it, just like a credit card.  When you pay back the initial principal borrowed, you can again borrow.  A ceiling amount is fixed for your borrowings, so you cannot borrow more money than your stipulated ceiling amount.  A time limit is also set, which means that you can borrow only within that time, and not on the expiry of that time.  The rate of interest charged is variable, which means that is subject to the fluctuations of the interest rate market.  You can access a HELOC by credit card, a check, or an electronic transfer.  Lenders may require you to withdraw a certain minimum amount, and keep a certain minimum outstanding balance.
 

Home equity loan and home equity line of credit are both also known as second mortgages, as loans are advanced keeping your home as collateral.  In case you sell your home, then you have to repay back the loan.  You should explore the pros and cons of both types of debt before deciding on the one that best suits your requirements.  Both kinds of home debts can be availed online, through the Internet and are then known as online home equity loans and online home equity line of credit.
 

FEATURES OF A HOME EQUITY LOAN

• The current market value of your home (appraised value) minus the outstanding mortgage balance is known as the equity of your home.  Based on this equity, up to 80% of the equity is usually given as a loan.  This loan is known as home equity loan.  For using this loan, you are charged a periodic charge, usually expressed as a percentage, which is known as the rate of interest.  The rate of interest is dependent on the prevailing interest market fluctuations.  Getting a loan is advantageous when the interest market is down and getting a loan is expensive when the interest market is up.
  
• A home equity loan can be given to any adult citizen of sound mind who is possession of a home.
  
• The home is kept as a collateral, which means that if you fail to repay the loan or are late in giving your stipulated payments, then the home is taken away by the lending agency and you may have to vacate your home.  The lending agency then sells your home and realizes its money given to you.
  
• Since the home is your largest asset, and it is kept as collateral, hence home equity loans are usually taken for major expenses like the education of your children, medical expenses, or home improvements.  They are not recommended for providing day-to-day expenses.
  
• Before granting you the home equity loan, lenders may like to know your repayment capability by evaluating your job history, and your credit rating.  The credit rating is done either by the lenders or by professional credit rating agencies like Equifax, Experian, and TransUnion.  The credit rating is expressed as a score between 300 and 900.  A credit score of 600 and above is usually considered safe.  The higher the score, the better is your creditworthiness, which displays your repayment capacity.
  

·         If you have a credit score below 600, then it is known as bad credit rating.  In such circumstances, lenders may ask for a down payment, charge a higher interest rate, allow shorter duration of the loan, and may charge other fees as applicable.  A person with a bad credit score pays more than a person with a good credit score.