Chapter9: Accounting For Receivables
Section: Chapter Questions
Problem 1Q: What is the matching principle?
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Question
Explain the features of HELOCs that differentiate them from HELs with example?
Expert Solution
Step 1
Home equity refers to the difference in the value of the home and the mortgage balance. In HELs and HELOCs home equity in your home is used as collateral.
Step 2
Home Equity loans (HELs) are the loans for which lump sum amount is borrowed at the fixed interest rate. These loans are secured against the value of home.
Home Equity line of credit (HELOCs) is another source of borrowings where lump sum amount is not borrowed. Instead the amount as per requirement can be borrowed at variable interest rate.
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