When you take out a home equity loan you have to consider that there are different options when it comes to the type of loan. Next is a short description of both. A fixed versus a non-fixed rate, these options will have a very different impact on your finances.
A home equity line of credit is actually a non-fixed home equity loan. A certain sum can be borrowed and the value of the home minus a possible already existing mortgage covers the amount of the money that is borrowed in case the lender cannot pay the loan back. The borrower does not take out the total sum all at once. He or she takes out smaller parts of the total sum until the entire approved sum has been taken out.
Rates might change over time when you have a home equity line. The borrower can request certain preferences. The homeowner has some say in this and puts in some variables like how much is being borrowed, for how much minimum monthly payment should be set, what the repayment rate is and such. This kind of loan can get kind of scary because rates change, rates are not predictable, and interest can really inflate. The good thing is that this loan is very flexible.
When you want to borrow a lot of money on your home, even up to 125 % of the value, you should look for a fixed rate deal. The house is also here the security deposit.
These loans do give the lender the money all at once. All payments are going to be scheduled throughout the time to pay the money back. The amounts even are set. For many people this is a much better scenario because it makes it easier to plan your budget. Also those who need a big amount of money for something are better off with a fixed rate home equity loan.
It all comes to the point that you make your choice based on the amount of money you need at once, what you are going to use that money for, and what is better for you in terms of paying back. After all your house is at stake when you use it as a security deposit and so it is an important enough matter to think and rethink before you act.