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Home Equity Loan

Home Equity Loan

A type of loan that homeowners can take out to borrow against the equity in their homes. Equity refers to the difference between the value of the home and the outstanding mortgage balance. For example, if a home is worth $500,000 and the homeowner still owes $200,000 on their mortgage, they have $300,000 in equity. Homeowners can use a home equity loan to access a portion of this equity as a lump sum payment, which can be used for various purposes such as home improvements, debt consolidation, or education expenses. One advantage of a home equity loan is that they typically have lower interest rates compared to credit cards or personal loans since the loan is secured by the home's equity. Additionally, the interest paid on a home equity loan may be tax-deductible, making it a popular choice for homeowners who need funds for large expenses. However, it's important for borrowers to remember that they are putting their homes at risk by using them as collateral, and failure to repay the loan could result in foreclosure.

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