A home equity loan allows the homeowner to get a loan by using the equity of the owners' home as collateral. The equity consists of the funds the owner has invested in the property in order to own it or improve it.

The term "home equity" is a term used to describe the extent of ownership you have in your home. Of course, your home equity will also be dependent on the actual value of your home. So, if you had used the mortgage route to buy your house, the value of your home equity would be dependent on the amount of home mortgage loan that you have paid back to the mortgage lender.

A home equity loan is the loan that the owner can get by pledging your home equity as collateral to the mortgage lender. Your home equity loan amount will be a certain percentage of the total value of ownership that the owner has in the home. Besides the home equity, your home equity loan will also be dependent on the mortgage lender who in turn will check your credit rating, your age and a lot of other things before approving your home equity loan.

Home equity loans are used by people for a lot of different purposes. One of the most important uses of home equity loans is to finance a high interest debt (e.g. credit card debt). Since home mortgage loans offer one of the lowest interest rates among all kinds of loans, it makes sense to use a home equity loan to finance your personal loan or credit card debt.