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Choosing a home equity loan that is right for you takes lots of thought. The first thing you should know is that you are putting your house down as collateral and if you are unable to repay your loan, the bank can sell your home to recoup it losses. Before you decide what type of loan to take out, make sure you are comfortable with the idea of placing your home down as collateral.

There are two main categories of home equity debt; they are home equity loans and a home equity line of credit, sometimes called Heloc. It should be noted that these two loan products both use your home as collateral. However, a home equity loan is much similar to your primary mortgage, in that it is a fixed interest loan. The interest rate for the life of the loan will stay the same, whether you repay your loan in 5 years, 10, years or 30 years.

A home equity line of credit has a different kind of interest rate structure. Where a home equity loan has a fixed interest rate, a home equity line of credit has a variable interest rate. Variable interest rates can fluctuate. Sometimes, you can get lucky and have lower interest rates, but sometimes these interest rates can see a sharp increase, causing the money that you lend to be more expensive.

A home equity loan is for homeowners that are looking to take out a large amount of money at one specific time. For instance, if you are planning on adding an addition to your home or would like to take out $50,000, a home equity loan is usually the loan product you should look into.

A home equity line of credit is similar to a credit card, where you can borrow small amounts of money several times a year and quickly pay them back. Usually the advantage to a home equity line of credit is that the interest rates are lower than normal credit cards, due to the fact that the loan is secured with your home as collateral.

Besides the type of equity you can borrow, do lots of research on possible fees that you will need to pay when borrowing or applying for a home equity loan. These fees can play a big part in your choice. Additionally, shop around and do your research. Don't jump at the first offer you see. Usually home equity loans are very competitive and if you shop around, you should be able to find a loan that fits your needs well.