Home equity lending

What’s a Home Equity Loan?

A Home Equity Loan lets you borrow a set amount of money in one lump sum, which you then repay over a fixed period of time, often with a fixed interest rate.

How it works

• You’re approved for a specific loan amount
• You receive all the funds at once
• You make consistent monthly payments over the loan term
• Uses your home as collateral

Best used for:

• Home renovations with a known cost
• Debt consolidation
• Large, one-time purchases

Pros:

• Predictable monthly payments
• Fixed interest rate
• Works well for big, one-time expenses

Cons:

• Less flexible if you need money later
• Can take time to close

What is a HELOC?

How it works

• You borrow from your line of credit as needed
• You only pay interest on what you use
• Rates and payments can change over time

Best used for:

• Ongoing home projects
• Expenses that vary over time
• Situations where flexibility matters

Pros:

• Flexible access to funds
• Borrow as much or as little as you need
• May help build credit if managed responsibly

Cons:

• Variable interest rates can raise payments
• Easier to overborrow
• Your monthly payments may change

How to decide which is right for you

The right choice depends on your situation. Some questions to ask yourself might include:

What is the money for?

If it’s a one-time expense, a Home Equity Loan may be a better choice. If it’s for ongoing or unpredictable costs, a Home Equity Line of Credit may be a good option.

How stable is your budget and income?

Fixed payments with a Home Equity Loan may be more budget-friendly.

Do you need flexibility?

A Home Equity Line of Credit (HELOC) gives you the ability to access funds over time.

What are current interest rates?

With a HELOC, variable rates may change your payments.

Real-life examples

Here are some examples of when you may want to choose a HELOAN or HELOC. These are only examples, so be sure to consider your particular circumstances.

• Kitchen remodel with a set budget: A Home Equity Loan may make sense for you.
• Whole-home renovation: If costs are uncertain, a HELOC may work better.
• College expenses: A HELOC may help if costs change each semester.

How to apply for a Home Equity Loan or HELOC

You can apply for a Truist Home Equity Loan or HELOC online, and the processes are similar.

Before you apply, you may want to check your credit score, estimate how much equity you have, and gather income and debt information. Comparing rates and lenders can also help.

Here’s what you’ll need to provide for your application:

• Personal information (name, home address, phone number, and Social Security number)
• Co-applicant’s personal and employer information, if applicable
• Employer information (name and phone number of employer)
• Financial assets (description, financial institution, and value)
• Financial debt (lender name, payment amounts, and balances)
• Collateral information (asset, lender name, balance/value, and description)

Once you apply, a Truist representative will contact you to review your information and request any required supporting documentation, such as tax statements.

Alternatives to consider

Home equity lending may not be right for everyone, and there are other options to consider.

Cash-out refinance

With a cash-out refinance, you replace your current mortgage with a new, larger one, and receive the difference in cash.

Personal loan

Depending on whether your personal loan is secured or unsecured, you may not need collateral. However, unsecured loans tend to have higher interest rates than secured loans.

401(k) loan

Depending on your company and plan, this may be an option for you. However, a 401(k) loan is often best used only when other options are limited, because of the risks involved. By taking a 401(k) loan, you reduce your retirement growth. Depending on your age, you may owe penalties. Repayment rules are strict, and missing payments can trigger taxes or penalties. In addition, if you leave or lose your job, some plans may require full repayment quickly. And if you pause or lower new contributions while repaying the loan, you may miss employer matching contributions.

Each option has trade-offs, so it’s worth comparing carefully.

Both a Home Equity Loan and a HELOC let you turn your home equity into borrowing power. The right choice for you depends on how you plan to use the money and how much flexibility you need. A Home Equity Loan can offer predictability with a fixed rate and steady payments, while a HELOC can provide ongoing access to funds when expenses are harder to pin down. Taking time to weigh your goals, budget, and comfort level with changing payments can help you choose the option that works best for your situation.

Frequently asked questions about home equity loan options

What happens if I sell my house before paying off the loan?

If you sell your home before paying off a Home Equity Loan or HELOC, the loan must be paid off as part of the sale. That means the remaining balance on your mortgage and your HELOC or Home Equity Loan is paid off using the sale proceeds. This generally happens automatically during the closing process. Any money left after all loans, fees, and costs are paid goes to you. If there isn’t enough equity to cover the loans, you may need to bring extra funds to closing or work with the lender on next steps.

Can I use home equity funds for anything?

In most cases, yes. Home equity funds—both a HELOC and a Home Equity Loan—are flexible and can be used for purposes including:

• Home improvements or repairs
• Paying off higher-interest debt
• Education expenses
• Major or emergency purchases
• Business or investment need.

Interest may be tax-deductible, but only in certain cases.^{Disclosure 1} And some lenders might restrict some uses, such as real estate investing or business startup costs.

Will a HELOC or Home Equity Loan affect my credit score?

Yes, both can impact your credit score, but the extent depends on how you use and manage them.

Applying can cause a small dip in your credit score, as most lenders run a hard credit check when you apply. However, this dip is usually temporary.

Making payments on time can support or improve your credit over time.

It may also be worth knowing how the two show up on your credit report. A HELOC is reported to credit bureaus as a revolving account, like a credit card. Using a large portion of your available credit may lower your score. A Home Equity Loan is reported as an installment loan. Fixed payments usually have less impact on credit usage calculations.