A Home Equity Loan is a traditional closed end loan often referred to as a second mortgage. The borrower receives a one-time lump sum to be repaid over a fixed term and interest rate. Monthly payments remain the same throughout the lifetime of the loan. This traditional loan often has a lower interest rate than a HELOC loan.
Commonly referred to as HELOC, this is a line of credit available for a set length of time. Money is issued by check or credit card and can be used as needed. Funds come with an interest-only draw period or one where you pay both interest and principal. When the line of credit expires, you enter the repayment period. Money owed must be repaid before or at time of selling your home.