If you have equity in your home and you need cash right now, then line of credit home equity loans may be just what the doctor…er…debtor..ordered. A home line of credit loan is a credit limit attached to your debit card in most cases, that you can use and pay back each month like a credit card. The difference with a home equity line is that you can borrow over time so that you don’t have to take out the entire loan amount at once.  This means that you won’t run into a huge problem paying it back since you are only taking out small amounts at one time.

So what are the benefits of a home equity loan vs line of credit. What is the difference in fact? A home equity loan is money that is loaned to you in one lump sum that you usually spend on something like a vehicle, remodeling for your home or other large purchases. A line of credit home loan is credit that is available to you, but does not necessarily have to be used. The line of credit will be available whenever you want to use it. With line of credit home equity loans you can take out a small amount of credit from your equity – say $1000 – and use it when you need it, upping your credit limit later if nencessary.

Interest rates on a home equity line of credit will range from two to five percent. You can usually get a discount on these interest rates by using direct bank draft, which is allowing them to draft your monthly payment from your bank or debit card on a certain day of the month automatically. The benefit of this line of credit is immense, especially if you are doing something like remodeling with it, as you can use it as needed rather than feel that you need to spend the money, since you have already taken the loan out.  A line of credit is also great for college tuition and other fees since you can use it as needed as well.

You’ll have a minimum that you’ll have to take out however, so make sure that you have enough equity to be able to take the loan out. For instance, with some mortgage lines of credit you’ll be required to take a line of credit of at least $5000 or $10,000. Since your home is on the line with this home equity line of credit you should not think of it as a credit card type of available credit, but rather reserve it for more important items such as education or specific purchases for your home or home improvement projects.

You’ll likely only be able to borrow against 75% of your home equity regardless so keep this in mind before you make plans to spend the money. Suppose that you have a home loan for $200,000 and with your down payment and payments, you have a total of $40,000 in equity so far. You’ll likely only be able to borrow between $15,000 and $17,000 depending on the lender. Also, the lender will look at your debt to income ratio to see what they will approve you for, so keep your Debt to Income under thirty five percent.