Two types of home equity loans are...


Commonly referred to as a second mortgage, a home equity loan borrows based on your home's equity without having to refinance your first mortgage. Your annual percentage rate and your interest rate are fixed for the term of the loan. This type of loan acts very similarly to a car loan, as you make standard payments for a specified number of months to repay a predetermined total loan amount.

Many people get home equity installment loans to consolidate debt, pay student expenses, purchase a car, or for anything which may cost a larger amount of money all at one time. Getting a home equity loan takes less time and costs less money than a complete first mortgage refinance, and the credit score requirements are often less stringent.


A home equity line of credit works similarly to a credit card. Based on your home equity, you can borrow up to a certain amount as you need, thus only having to pay interest on what you have borrowed. Interest rates and annual percentage rates are variable based upon the economy index rate.

Some people prefer an equity line of credit over a regular equity loan because they do not need to draw all the money at once, and they only need to pay interest on what they currently have drawn out. This is especially useful for longer-term purchases and expenses, such as home improvements.