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Short answer
A HELOC is a line of credit against your home equity that you can draw on, repay, and draw on again during a set draw period, usually at a variable rate. A home equity loan gives you the money as one lump sum, usually at a fixed rate with equal payments that pay off the loan. Both are second loans that keep your current mortgage in place and both use your home as collateral, so the choice usually comes down to whether you need money over time or all at once, and whether you want a payment that can change or one that stays the same.
| Feature | HELOC | Home equity loan |
|---|---|---|
| How you get the money | Draw as needed during the draw period | One lump sum at closing |
| Interest rate | Usually variable | Usually fixed |
| Payments | Can change; often rise when repayment starts | Equal payments that pay off the loan |
| Interest charged on | What you have drawn | The full loan amount |
| Need more later? | Borrow again up to your limit during the draw period | Apply for a new loan |
| Your first mortgage | Stays in place | Stays in place |
| Risk | Your home secures the line | Your home secures the loan |
| Right to cancel | Generally three business days after signing | Generally three business days after signing |
The CFPB describes a home equity line of credit as an open-end line of credit that allows you to borrow repeatedly against your home equity. You can generally borrow up to your credit limit during the draw period, which could last 10 years, for example. HELOCs usually have a variable interest rate, so your payments may change from month to month.
After the draw period, you enter repayment and can no longer borrow. The CFPB notes that monthly payments are often significantly higher once you enter repayment. If your home's value drops significantly, your lender might not allow you to take out more under the line.
According to the CFPB, a home equity loan lets you borrow using the equity in your home as collateral. You receive the money as a lump sum, and the loan usually has a fixed interest rate that will not change. The CFPB's HELOC booklet describes the payments as equal payments that pay off the entire loan, and notes that if you need more money later, you need to apply for a new loan.
Both loans use your home as collateral. The CFPB warns that if you fall behind on a HELOC or cannot repay it on schedule, you could lose your home, and that if you cannot pay back a home equity loan, the lender could foreclose. The CFPB also cautions against borrowing against your home as part of an investment strategy, and suggests talking with a credit counselor before using home equity to consolidate debts.
The CFPB explains that most non-purchase money mortgages, such as home equity loans, come with a right of rescission, which generally gives you three business days after signing to cancel.
A HELOC is often worth a close look if:
A home equity loan is often worth a close look if:
If you are thinking about replacing your first mortgage instead, see HELOC vs cash-out refinance.
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A HELOC is a line of credit you can draw on repeatedly during a draw period, usually at a variable rate. A home equity loan pays you a lump sum, usually at a fixed rate with equal payments.
The CFPB says a home equity loan usually has a fixed interest rate, while HELOCs usually have a variable rate, so HELOC payments may change.
Yes. Both are second loans secured by your home, so your current first mortgage stays in place.
You can no longer borrow and you enter the repayment period. The CFPB notes that monthly payments are often significantly higher once repayment begins.
Yes. Both use your home as collateral. The CFPB warns that if you cannot repay, you could lose your home.
The CFPB explains that most non-purchase money mortgages, such as home equity loans, come with a right of rescission that generally gives you three business days after signing to cancel.
This page is general education, not a loan offer, commitment, or approval. Program rules and figures change; the figures here were checked against the sources below in October 2026. Your options depend on your credit, income, property, and each lender's guidelines. All loans are subject to approval.
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