What is a home equity loan? There are so many people who are wondering about that. Home equity loan is the type of loan given for people by using their homes equity for the loan’s collateral. Before we know better about what a home equity loan is, we need to know what the collateral is. Collateral is the property that we use as the guarantee that we will pay our debt. It is the pledge that would be taken by the lender if you do not pay your debt. So, the home equity loan is the type of loan where you are using your home as the collateral, or in other words, you are putting your house in others hand for a while, whenever your payments done you would get it back and when you do not pay it you can lose your home.
There are many people who are wondering about getting the home equity loan because they think that this type of loan is easy and can get them much money to be able to use for their need. The home equity loan can give you the money based on your home’s equity that the money you get can be used for anything, such as college, home improvement, and many more.
Types of Home Equity Loan
There are two types of the home equity loan; those are the home equity loans and the home equity line of credit (HELOCs). Actually both of the types are referred to the same definition of the second mortgage that you can get. It is because you are using your home as the collateral, your home is the mortgage which is becoming the pledge.
- What is a home equity loan? Home equity loan is the fixed interest rate with the same payment each month for the loan given based on your home’s equity.
- While the home equity line of credit is the home equity loan but works like as many as credit cards work. What make it different from the home equity loan that when you use the HELOCs, you can revolve your balance and can withdraw money using it. it is said to be more flexible than the home equity loan.
Read also: HOME DEPOT PROJECT LOAN
Pros and Cons to Have Home Equity Loan
There are some pros people can get, such as easy to be applied because the collateral is your home, so that you would need any credit history which is usually need in many bank or loan company to get the loan. However, some people may think that the risk of the home equity loan is quite higher because we can lose our home. we know that today, house is in the higher price, which means that when we cannot pay the debt of the home equity loan, the possibility of losing the house is getting higher. Then getting the loan for buying one more can be quite difficult. However, it can be the best for you the home equity loan can give you much money in instant, but make sure that you are going to pay all on time. Have you still wondered about what is a home equity loan?