You’ve probably seen the ads for home-equity loans. They normally show a tanned and fit couple frolicking on the beach during their dream vacation or an all-American-looking family smiling in front of their gorgeous new van. Sometimes they show a blushing bride to be wearing an engagement ring with a diamond the size of a Volkswagen or a kid grinning ear to ear as he opens the best Christmas present of his life.
Home-equity loans and home-equity lines of credit can be very convenient. In fact, they can be lifesavers if you have unexpected expenses or expenses you just can’t cover. installment loan This type of loans is taken, as the name implies, against the equity you’ve built up in your home. Your equity is used as collateral on the loan. Always remember, though, that there’s a big risk associated with home-equity loans. If you default on the loan, you lose your home.
What is a Home Equity Loan?
A home equity loan is simply a loan keyed to the equity in your home. The equity in your home is the value of your home less the balance of the mortgage you used to purchase the home and any other debt secured by the home, such as a tax lien, judgment lien, or second mortgage.