Home loans are available for those purposes which are related to homes. Whether you have to purchase a home or you need cash to perform any activity related to home like revamping, maintenance, extending rooms etc.
If we talk about home equity loan then there are two types of home loans: the ones closed at the end, and the line of credit for the equity of the home. In first case, the amount of money needed by borrower is loaned and he repays the amount on monthly basis along with rate of interest. The due date to pay back all the money loaned is known to the borrower at the time when money is loaned. Also the rate of interest is fixed.
The line of credit is like a credit card. These lines of credit will allow the credit based on the amount approved. It is not necessary to take money in one slot. It is possible to obtain the money when it is needed. Whenever you need money you can show the line of credit and take the money.
The line of credit is valid for five to twenty years depending upon your choice. You can take cash when you need it. But when the term of credit line exhausts then you need to pay back the full amount of loan taken in one single transaction. The rate of interest is variable and changes according to the economy.
The advantage of such type of loan is that you have the flexibility of using the money. Instead of deciding when to pay the money back, you decide when to take money and how much to take. The disadvantage of such loans is that there is high risk of losing your home in case you are not able to repay whole amount on due date. Also there is risk of increasing rate of interest during the life time of the loan. Therefore, customers should know the maximum value of rate of interest so that they may guess to what extent the rate can increase.
In spite all that, both types of loans have advantages of their own. Depending upon you need and budget you can take any type of loan.