What is a home equity loan what does it do?

== A home equity loan is a type of loan in which the borrower uses the equity in their home as collateral. Home equity loans are based on the amount of equity you have built up in your home. (Home equity is the difference between the current value of a home and the amount still owed on the mortgage. As the principal of the mortgage amount decreases as a result of monthly mortgage payments, the home equity increases) You can borrow your loan as a traditional home equity loan (second mortgage) or a home equity line of credit (HELOC), which functions in a similar manner as a credit card. These loans are sometimes useful to help finance major home repairs, medical bills or college education. Which type of loan you choose is up to you and your specific financial needs. Both loan types are primarily low interest loans and, for most home equity loans, the interest you pay is tax deductible. However, it is important to know that when you take out a home equity loan, it means the lender can reposes your home if you default on your payments. So it's crucial that you maintain your loan payments. A home equity loan is a great financial resource, but if you don't pay it back, it could end up costing you your home.