While both terms might be used in the same context, there is a clear difference between them. A home equity loan is a loan in addition to the mortgage. This type of loan uses your home as collateral. The lender approves a lump sum, which you need to return based on monthly instalments.
What is a home equity loan?
Many will refer to home equity as a second mortgage. Technically, it is similar to a mortgage. You get to use the lower interest rates, knowing that credit cards usually offer high interest. But, keep in mind that the home equity interest will still be higher than finance. Knowing that it comes as a second mortgage, it puts the additional payment on your side.
What is HELOC?
The principle is the same as the home equity loan. However, the only difference is the way you receive the loan. With HELOC, you don’t receive a sum of cash upfront. The lender approves your access to a line of credit, which is left to your freedom. While you have access to it, you can use it when you have the need.