What is a Home Equity Loan?

Home equity is what your home earns as the market goes up so if you bought your home at 100,000 dollars and now you can sell it at 150,000, 50,000 is your equity. Home equity loan is a loan agains the 50,000. These loans are usually low rate loans like 3.5% people use them as a personal loan.

A home equity loan is a secondary loan, where you, the borrower uses the equity (some liquid value) in your home as collateral. These loans can be used to finance major home repairs, medical bills or college education. Be mindful that a HEL creates a lien against your house, and reduces actual home equity.

As far as being "good" or "bad", it depends upon several factors, key being what you want to use the loan for. For example, if your using it to improve the home, eventually you will make the amount of the loan back, plus interest, by the appreciation in value of the home. This would be a good investment, because your being "paid back" over time. A bad example, using the equity in your home to buy a car, boat, or some other non-asset. Meaning, you are using the equity in your house to buy something that will not appreciate and some day pay you back.

a mortgage loan is giving you the money to buy the house , a home equity loan is taking the money you paid off your house as a loan and it gets added to your mortgage