Short answer: a home equity loan gives you one lump sum with a fixed payment; a HELOC gives you a line you draw on and pay down. Choose the loan when you know the exact amount and want it all at once; choose the line when you'll borrow in stages, want to pay down and redraw, or want the money available before you know precisely how much you'll use. The old objection to HELOCs — variable rates — doesn't apply here: this program is a fixed-rate line with 10, 15, 20, or 30-year terms.
These two products get confused constantly, partly because some lenders use the names loosely. Here's the clean version of the difference, and how to pick between them for the way you'll actually use the money.
The two products, side by side
- Home equity loan. A second mortgage. You receive the full amount at closing, at a fixed rate, and repay it in equal monthly payments over a set term. Simple, predictable, and inflexible: if you need more later, you apply again.
- HELOC. A line of credit secured by the home. You have an approved limit, you carry a balance you can pay down and draw against again during the draw period, and you pay interest on the balance you carry. This program fixes the rate for the term you choose and is fully amortized — every payment includes principal and interest, with no interest-only stretch and no prepayment penalty — so the payment on a given balance is predictable and the balance actually falls.
Choose the loan when…
You know the exact amount, you need all of it at once, and you want to set the payment and forget it. A single large purchase, a known payoff, a one-time project with a firm contract price. The loan's rigidity is a feature here: there's no line to be tempted by and nothing to manage.
Choose the line when…
The amount will come in stages — a renovation billed over months, tuition by semester, a down payment now and a reserve later. Or when you want capacity available and don't want to pay for money you haven't used yet. Or when speed matters: this line funds in as little as 5 days from application with a soft-pull pre-qualification and no appraisal appointment on most lines up to $400,000, while bank home equity loans usually run on a mortgage-style timeline.
The fixed-rate question
Historically the real trade-off was rate stability: home equity loans were fixed, HELOCs were variable, and cautious borrowers paid for the flexibility of a line with the risk of a rising rate. A fixed-rate, fully amortized HELOC removes that trade-off — and removes the other classic HELOC problem too, the interest-only draw period that ends in a payment jump. You get the line's flexibility with the loan's predictability, which is why for most uses we'd point you to the line and reserve the lump-sum loan for cases where you specifically want the rigidity.
Costs and how to compare
Rates and fees on both depend on your credit, the verified value, lien position, and state, so we don't quote them here. When you compare offers, compare the total cost over the period you'll actually carry the money, and compare the size you'll actually use — not the maximum. A line that lets you carry less for less time will usually come out ahead of a lump sum you didn't fully need.
Common questions
What's the actual difference between a HELOC and a home equity loan?
A home equity loan is a lump sum at a fixed rate with a fixed payment. A HELOC is a line you can draw on and pay down. Traditionally HELOCs were variable-rate; this program is a fixed-rate line, which narrows the gap considerably.
Which one is cheaper?
It depends on how you'll use the money. If you'll carry the full amount for years, the two are close and the rate you're offered decides it. If you'll borrow in stages or pay down and redraw, the line usually costs less because you're not carrying money you don't need.
Can I get a fixed rate on a HELOC?
Yes — this program is fixed-rate with 10, 15, 20, or 30-year terms. That's the main thing that used to push people toward a home equity loan.
Which one is faster?
This HELOC funds in as little as 5 days from application, with most lines up to $400,000 closing without an appraisal appointment. Home equity loans at banks typically follow a mortgage-style timeline of several weeks.
Can I have both?
Sometimes, subject to lien position and combined loan-to-value limits. It's rarely the best structure. Pick the one that matches how you'll use the money.
Which is better for debt consolidation?
Either works. A lump-sum loan is tidy when the payoff amount is known and fixed. A line is better when you want to pay balances off in stages or keep some capacity in reserve. See the debt guide for the honest caveats.
Related guides
Not sure which one fits?
Tell us what the money is for and how it'll be spent over time, and we'll tell you which structure we'd choose — and price it.