What Is a Home Equity Loan?
A home equity loan lets you borrow a fixed amount using your home as collateral. It offers a predictable monthly payment and fixed interest rate, making it easier to plan your budget.
Home equity loan vs HELOC
Unlike a HELOC, which works like a credit line, a home equity loan provides a lump-sum payment and stable repayment schedule. Choose the loan if you need a one-time amount for renovations, consolidation, or major expenses.
When to use a home equity loan
- Home renovations or major repairs
- Debt consolidation at a lower interest rate
- Large education or medical expenses
How to evaluate affordability
Calculate the monthly payment, compare it to your current budget, and ensure that your loan-to-value ratio stays within the lender’s limit. A home equity loan is only wise when you can comfortably manage the payment.
Key risks
Because the loan is secured by your property, failure to pay can put your home at risk. Always compare terms, fees, and prepayment rules before borrowing.