Home equity loan
From Debt Free Dude
A home equity loan is a loan secured by the equity you have in your house. Normally these are low interest loans because you have a solid asset backing up the loan. In many cases this may be a better way to purchase an automobile because you can take advantage of a lower interest rate that you may be able to get from another lender.
Home equity loans work in a similar way to a home equity line of credit. The difference is that the home equity line of credit will typically be for a variable amount while a home equity loan will be for a fixed amount.
One of the popular uses for a home equity loan is as a do it yourself debt consolidation loan. You take out a loan at the lower home equity rate and use it to pay of credit cards and other debt that are at a higher interest rate. So if you have $5,000 in credit card debt at 35% interest, you replace it with a $5,000 home equity loan at maybe 7%. There are dangers in doing this, but for a disciplined person it can be a way to pay off the debt much faster because less money is going toward interest.
A reverse mortgage is a type of home equity loan.
