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There are primarily two types of home equity loans available for homeowners:
- Home Equity Loan: This is a lump-sum loan with a fixed interest rate, which means you receive the entire loan amount upfront and repay it over a set term with predictable monthly payments. This option is ideal for homeowners who need a specific amount for a one-time expense, such as home renovations or debt consolidation.
- Home Equity Line of Credit (HELOC): Unlike a traditional home equity loan, a HELOC offers a revolving line of credit that you can draw from as needed, similar to a credit card. The interest rates are typically variable, and you only pay interest on the amount you borrow. This flexibility makes HELOCs suitable for ongoing expenses or projects with fluctuating costs.