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A home equity loan is a form of loan that enables homeowners to borrow money using the equity they have accrued in their homes. House equity is the difference between the value of a home and the outstanding mortgage balance. Homeowners might use this equity as security to obtain a loan from a lender.
The interest rate on home equity loans is typically set, meaning it won't change over the course of the loan. The amount that can be borrowed varies according on the homeowner's credit score, income, and other circumstances, as well as the amount of equity in the home.
A home equity loan can be used for a number of things, including making modifications to the house, paying off high-interest debt, or supporting a child's education. Home equity loans can be an appealing alternative for some borrowers because the interest paid on them is frequently tax deductible.
A home equity loan does, however, come with some dangers. Lenders have the right to foreclose on properties when borrowers are unable to make loan payments. A home equity loan can also lower the amount of equity in a house, which can make it more challenging to sell or refinance the mortgage in the future.
