At some point, you might find yourself looking for a slug of money that you don’t have close at hand. It could be for home improvement project or something unexpected, like springing your brother from the slammer. Either way, you need money. What do you do if you don’t have it in your checking account?

Well, if you own your home, you have the option of getting a home equity loan or a home equity line of credit.

A home equity loan is basically a second loan (after your mortgage) that you take out on your house. But where the first loan (your mortgage) went toward the purchase of your home, the second loan (the home equity loan) is just a lump of cash the bank hands over directly to you – to spend as you please. Pay for your kids’ education, living expenses if you lose your job… or a lawyer for your brother.

Once you’re approved for a home equity loan, you get a check for the total loan amount. Home equity loans have a fixed interest rate and a fixed term (the amount of time you have to repay the loan), usually 10 to 15 years. Then you’ll make monthly payments on the loan until it’s all paid up.

With a home equity line of credit (HELOC) , you’re approved for a total loan amount, but it’s not given to you in one lump sum. You get a credit/debit card, or a checkbook (or both) and you withdraw money when needed. You only pay interest on the amount you have out, and you’re only limited by the total amount of the loan. Up to $100,000 of the loan is tax deductible.

HELOCs are trickier than typical home loans that pay you one lump sum up front. They can have:

• Fluctuating Interest Rates – your payments can increase (sometimes drastically: some lenders offer a ridiculously low “introductory rate,” only to jack it to the high heavens after a month or two).

• Advance Period Terms – only let you access the money for a set period of time, say five years. After then, you can’t withdraw money and you have to repay whatever you borrowed over the next ten years (known as the “repayment period” ).

• Balloon Payment Terms – Some only charge you interest for ten years, but then want the whole loan paid off at once.

Want to Know More?

• Should You Use Home Equity?
• Advice on Where and How to Get a Good Deal
• Grilling Guide: Questions to Ask When Shopping for Home Equity