Home equity can provide access to money for renovations, education costs or other major needs. Two common options are a home equity loan and a home equity line of credit, also called a HELOC.

A home equity loan generally provides one lump sum. It may offer a fixed interest rate and predictable monthly payments, making it useful when the total expense is already known.

A HELOC works more like a credit card secured by the home. Borrowers can draw money as needed during an approved period. HELOCs frequently have adjustable rates, so payments may change.

Both products use your home as collateral. Missing payments could lead to foreclosure, making affordability more important than convenience.

Compare interest rates, annual percentage rates, appraisal charges, closing costs and annual fees. A HELOC may also include inactivity, cancellation or rate-conversion fees.

Ask how payments will change after the HELOC’s draw period ends. Some borrowers are surprised when they can no longer withdraw money and must begin repaying principal.

Avoid using home equity for routine shopping or expenses that will quickly disappear. Borrowing may be more reasonable when the money supports a carefully planned, lasting purpose.

Request offers from several lenders and read every disclosure. Calculate payments under a higher rate if considering a variable-rate HELOC.