You've probably heard of a home equity loan before, as well as a home improvement loan, but do you really know the difference? While the two sound pretty similar and can be used for common home projects, there are key differences.
Home equity loans
Home equity loans are a money-saving way to use the equity you've built up in your home towards a variety of financial needs. Plus, the loan may be deductible. Here's some ways you can use a home equity loan:
- Second honeymoon
- Investment opportunities
- Pay off other debts
- Emergency situations
- Home remodel projects
Home improvement loans
If you've got a home project in mind, a home improvement loan may be the solution. Home improvement loans can be used for a variety of needs:
- Build your dream kitchen
- Enjoy summer on your new deck or pool
- Expand your garage
- Create a master bathroom retreat
- Or build the home of your dreams
How do you decide which one is right for you?
It really comes down to what your ultimate goals are and financial situation. As you read above, a home equity loan serves a variety of purposes beyond just home updates, while a home improvement loan is intended for that sole purpose. Also keep in mind that if you haven't owned your home for very long and do not have much equity built up yet, a home improvement loan may be a better choice. As always, it's best to talk with your banker to determine which route will work for you and your needs.