Each lender will have different repayment terms when it comes to your home equity loan, which is why it is important to shop around and find those terms that best fit into your life and that you know you can afford.
When it comes to repaying a home equity loan, it is much similar to an auto loan. The interest is added into the payment amount for a set time. For example, fifteen years of a certain amount, includes the interest. Your home is used as collateral which means that in the even that you are unable to pay, you risk losing your home.
Repaying a home equity line of credit is slightly different. This option is more similar to a credit card in that you use what you need up to a set amount and then make payments monthly. However, the interest rate is calculated much like a credit card meaning that if you allow the balance to accumulate, then the balance will become higher. Plus, the interest rate can vary from month to month. Many times the lender will also allow you to pay on the interest each month, however, will require a balloon payment at a certain time to pay off the entire amount.