HELOC vs. Home Equity Loan: Which is Right for You in 2025?

HELOC vs. Home Equity Loan: Which is Right for You?

When you’re looking to tap into your home’s equity, two options often come up: a home equity line of credit (HELOC) and a home equity loan. While both let you borrow against the value you’ve built in your property, they work very differently, and the right choice depends on how you plan to use the money.

This guide breaks down the key differences between HELOCs and home equity loans so you can decide which option fits your financial needs.

The Basic Difference

A HELOC is a revolving line of credit. You can borrow, repay, and borrow again during the draw period, much like a credit card. You only pay interest on what you actually use.

A home equity loan is a lump-sum loan. You receive all the money upfront in one payment and immediately start repaying both principal and interest on the full amount, typically with fixed monthly payments over a set term.

Key Differences at a Glance

How You Receive Funds

• HELOC: Draw what you need, when you need it, up to your credit limit during the draw period. But note that some HELOC lenders require you to draw your entire credit limit at closing.
• Home Equity Loan: Receive the entire loan amount at closing as a single lump sum.

Speed to Funding

• HELOC: Generally faster to close, often within 2-4 weeks, or within days with online lenders. Once approved, you have immediate access to funds whenever you need them without reapplying.
• Home Equity Loan: Typically takes 2-6 weeks to close. You receive funds at closing, but if you need additional money later, you’ll need to apply for a new loan and go through the entire process again.

Interest Rates

• HELOC: Usually variable rates that can fluctuate over time, though some lenders offer fixed-rate options or the ability to lock portions of your balance.
• Home Equity Loan: Typically fixed rates that remain the same throughout the loan term.

Payment Structure

• HELOC: During the draw period (often 10 years or more), you may make interest-only payments. Once the repayment period begins, you’ll pay both principal and interest, which can significantly increase your monthly payment. Some lenders, such as Trovy, allow you to convert outstanding draws or balances to a fixed rate installment loan so that you pay equal monthly payments.
• Home Equity Loan: Fixed monthly payments of principal and interest from day one, making budgeting predictable.

Flexibility

• HELOC: High flexibility. Borrow multiple times as needed without reapplying, as long as you’re within your credit limit and draw period.
• Home Equity Loan: No flexibility after closing. If you need more money later, you’ll need to apply for a new loan.

Best Use Cases

• HELOC: Projects with costs that unfold over time (like renovations), ongoing expenses, or situations where you want a financial safety net available but may not use all the funds.
• Home Equity Loan: One-time expenses with a known cost, like a specific home improvement project, debt consolidation of a fixed amount, or a major purchase where you want payment predictability.

When a HELOC Makes More Sense

• You’re not sure exactly how much you’ll need or when you’ll need it
• Your project costs will be spread out over months or years
• You want the option to borrow, repay, and borrow again
• You’re comfortable with variable interest rates
• You value having access to funds for emergencies or opportunities
• You’re looking for a fast funding process. HELOCs are often faster to originate than home equity loans.

When a Home Equity Loan Makes More Sense

• You know exactly how much money you need upfront
• You prefer predictable, fixed monthly payments
• You want protection from rising interest rates
• You’re making a single large purchase or consolidating a specific debt amount
• You don’t need ongoing access to additional funds

How Trovy’s HELOC Gives You the Best of Both Worlds

At Trovy, we’ve designed our HELOC to maximize flexibility while minimizing hassle:

• Fast Funding: Get approved in 10 minutes and access to your funds in as few as four days with our streamlined online process, so you can access your equity when you need it.
• Card-Based Access: Your Trovy HELOC comes with a credit card that gives you immediate access to your credit line, no need to request draws or wait for transfers.
• No Mandatory Draw: Unlike many HELOC lenders who require you to draw your entire credit limit at closing, Trovy lets you keep your credit line available until you actually need it. Borrow only what you need, when you need it.
• Flexible Repayment Options: Convert outstanding balances to fixed-rate installment loans, giving you the predictability of equal monthly payments when you want it.
• Low Rates: Access your home equity at rates significantly lower than credit cards and personal loans, with transparent terms from day one.

Whether you need funds for an ongoing renovation, want a financial safety net, or are planning a specific project, Trovy’s HELOC gives you the flexibility to use your equity your way.

The Bottom Line

Both HELOCs and home equity loans let you leverage your home’s value, but they serve different purposes. A HELOC offers flexibility and ongoing access to funds, making it ideal for projects with evolving costs or for homeowners who want a financial cushion. A home equity loan provides the predictability of a lump sum and fixed payments, perfect for one-time expenses where you know the total cost upfront.

The best choice depends on your specific situation: how much you need, when you need it, and whether you value flexibility or payment certainty more.