A home equity loan is a type of loan that allows homeowners to borrow money against the equity in their homes. Equity is the difference between the current value of the home and the amount still owed on the mortgage.
Home equity loans usually have a fixed interest rate and a fixed repayment term, and the borrower receives the entire amount of the loan in a lump sum. The loan is secured by the borrower’s home, meaning that if the borrower fails to repay the loan, the lender can foreclose on the home to recover the debt.
Home equity loans are often used to finance home improvements, debt consolidation, or other large expenses. They can also be used to pay for college tuition or to start a small business.
It’s important to note that taking out a home equity loan can put your home at risk if you’re unable to make payments. Before taking out a home equity loan, it’s important to consider your financial situation and make sure you can afford the payments. It’s also important to shop around and compare rates and terms from different lenders to make sure you’re getting the best deal.