Home Equity Loan: What Does It Mean?

A home equity loan is a type of loan that allows homeowners to borrow against the equity they've built in their property, receiving the funds as a lump sum that is repaid over a fixed term at a fixed interest rate. Because the loan is secured by your home, interest rates are typically lower than unsecured personal loans or credit cards. Common uses include home renovations, debt consolidation, and major expenses like medical bills or education costs. It's different from a home equity line of credit (HELOC), which works more like a revolving credit line. One important consideration is that if you fail to repay a home equity loan, the lender can foreclose on your home, so it should be used thoughtfully.