Home Equity Loans and Lines of Credit

There is a difference between 'Home Equity Loans' and 'Home Eqity Lines of Credit' -

A home equity loan is a lump sum amount (one-time) that is paid off over a period of time. The time period is fixed and so is the interest rate . After you receive the lump sum amount from the lender, you cannot borrow any further.

A home equity line of credit works differently. You can borrow up to a certain amount for the period of the loan (depends on the time limit decided by the lender). During this period you can withdraw money as and when required by you. For instance, you have $9,000 line of credit. You borrow $4,000 and pay off $2,000. You now have $7,000 in available credit. This gives you more flexibility than a home equity loan.