Both borrow against your equity. Both leave your first mortgage alone. The difference is how the money arrives and how the rate behaves.
Home equity loan
You receive one lump sum at closing and repay it in equal monthly payments over a fixed term, usually at a fixed rate. It suits a known amount: a renovation quote, a tuition bill, a specific debt you want gone.
HELOC
You are approved for a limit and draw against it as needed during a draw period, commonly five to ten years, paying interest only on what you have used. The rate is usually variable. It suits costs that arrive over time, or a reserve you want available without borrowing it all at once.
Side by side
- You receive: lump sum vs. a limit to draw on
- Rate: usually fixed vs. usually variable
- Interest on: the full amount vs. only what you draw
- Best when: you know the number vs. the number will arrive in pieces
Which one?
If you can name the amount today, the loan is simpler. If you cannot, the line is more forgiving. Either way, the lending partner will show you both on the call.