A home equity loan is a type of loan in which the borrower uses the value of their home as collateral. If the borrower defaults on the loan, the lender can foreclose on their home. Home equity loans are typically used for significant expenses such as home repairs, medical bills, or college tuition.
The loan amount is typically based on the equity in the home, which is the difference between the appraised value of the property and any outstanding mortgage balance. Home equity loans can be used for various purposes, including debt consolidation, home improvements, or other significant expenses.
The interest rate on a home equity loan is usually lower than that of a traditional mortgage or personal loan because your house serves as collateral for the loan. In addition, interest paid on a home equity loan may be tax-deductible (consult your tax advisor to confirm).
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