HELOC vs. Home Equity Loan: What's the Difference?
Both let you borrow against the equity you’ve built in your home - but they work very differently. Here’s how to tell which one actually fits what you need.
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Get Pre-QualifiedA HELOC Is a Revolving Line of Credit
A home equity line of credit works similarly to a credit card secured by your home. You’re approved for a maximum credit line, and you draw against it as needed during a set draw period, paying interest only on what you’ve actually borrowed. Rates are typically variable, meaning your payment can change over time as market rates move.
A HELOC’s flexibility - borrow what you need, when you need it - makes it well suited to ongoing or uncertain expenses, like a phased renovation, rather than a single known cost.
Two Ways to Get a HELOC
Coltrain offers HELOCs two ways: a Digital HELOC with no in-person appraisal and income verified instantly through Plaid (funding in as little as 5–7 days), or a Full Doc HELOC with full income documentation - which typically supports larger credit lines and doesn’t require an appraisal in most situations either. See both options in detail →
A Home Equity Loan Is a Lump Sum
A home equity loan, sometimes called a second mortgage, disburses the full loan amount at once, with a fixed interest rate and a fixed monthly payment over a set term - functioning much like your original mortgage, just for a smaller amount and typically a shorter term. There’s no draw period and no ongoing access to additional funds once it’s disbursed.
Side-by-Side Comparison
| HELOC | Home Equity Loan | |
|---|---|---|
| Access to funds | Revolving line, draw as needed | One-time lump sum |
| Rate type | Variable | Fixed |
| Appraisal | No appraisal needed in most cases | No appraisal needed in most cases |
| Best for | Ongoing or uncertain expenses | A known, one-time expense |
| Learn more | coltrain.com/heloc → | coltrain.com/expressequity → |
Which Fits Your Situation
A home equity loan tends to fit well when you know exactly how much you need and want the predictability of a fixed rate and fixed payment - a large, one-time expense like debt consolidation or a single home improvement project. A HELOC tends to fit better when your borrowing need is ongoing or uncertain in total amount, like a multi-phase renovation or an available cushion for expenses as they arise.
Both Are Secured by Your Home
It’s worth remembering that both products are secured by your home, meaning your house is collateral in either case. The choice between them is really about how you want to access the funds and whether payment predictability or borrowing flexibility matters more for your situation.
Frequently Asked Questions
What is the difference between a HELOC and a home equity loan?
A HELOC is a revolving line of credit you draw from as needed, typically with a variable rate. A home equity loan is a lump-sum loan with a fixed rate and a fixed repayment schedule, similar in structure to a second mortgage.
Which one has a fixed rate, a HELOC or a home equity loan?
A home equity loan typically has a fixed rate. A HELOC is more commonly structured with a variable rate, though some lenders offer options to lock a portion of the balance at a fixed rate.
Can I get a home equity loan and a HELOC on the same house?
It's possible depending on your available equity and a lender's guidelines, though most borrowers choose one or the other based on how they plan to use the funds.
Have Questions About Your Situation?
Every borrower’s situation is different. Talk to a Coltrain Mortgage loan officer to see how this applies to you.