 TITLE: Home Equity Loan vs. HELOC: What’s the Difference? CONTENT: Alternative Types of Loans\n--------------------------\nHome equity loans and HELOCs can be welcome sources of ready cash for qualifying homeowners, but they carry significant risks: If you are unable to keep up with your payments on a home equity loan or HELOC, the lender has the right to foreclose and take possession of your home.\nAlternatives to home equity loans and HELOCs that don't risk jeopardizing your home include the following:\n*   **Personal loan**: A personal loan is a form of unsecured credit, which means it doesn't require you to put up property as collateral against the debt. Loan amounts can range from $1,000 to $10,000, and interest rates vary widely, according to credit score and income level. You may be able to qualify with a fair credit score, but a credit score in the good range or better will give you access to a wider range of choices.\n*   **Personal line of credit**: Banks and credit unions allow borrowers with good credit to open personal lines of credit—revolving credit accounts that don't require collateral or that use the contents of a certificate of deposit (CD) as collateral. Like HELOCs, these credit lines allow withdrawals and payments in variable amounts, and only charge interest on outstanding balances. Personal lines of credit have finite draw and repayment periods, which are typically shorter than those for HELOCs—as little as three to five years each.\n*   **Peer-to-peer loans**: These can be had through online financial institutions that match investors wishing to issue loans with borrowers seeking loans. Known as peer-to-peer or P2P lenders, these sites don't always check credit scores, but they do typically require evidence of income and other assets. Peer-to-peer platforms can be a good resource for smaller loans (typically $5,000 or less). Repayment periods on P2P loans are typically fairly short, five years or less.\nA home equity loan or HELOC can be a tremendous resource for homeowners seeking cash. While there are no limitations on how you use them, using loan proceeds for home improvements can also offer some tax benefits. Which option is better for you may depend on how you plan to use the funds. A home equity loan may make sense for a single major renovation, which will cost a large sum all at once. On the other hand, a HELOC may make more sense if you're considering a series of smaller maintenance projects, and can save interest costs by paying back each expenditure before beginning a new one. END