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Simple English definitions for legal terms
equity loan
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A quick definition of equity loan:
An equity loan is when a bank gives you money using your house as collateral. This means if you don't pay back the loan, the bank can take your house. It's like borrowing money from a friend, but instead of giving them something valuable to hold onto, you give them your house.A more thorough explanation:
An equity loan is a type of loan that allows a homeowner to borrow money using their home as collateral. The amount of the loan is based on the amount of equity the homeowner has in their home. This type of loan is also known as a home equity loan.
For example, if a homeowner has a home worth $300,000 and they owe $200,000 on their mortgage, they have $100,000 in equity. They may be able to borrow up to a certain percentage of that equity, such as 80%, which would be $80,000.
Another example is if a homeowner needs money to pay for a major home renovation, they may take out an equity loan to finance the project. The loan is secured by the value of their home, so the interest rates may be lower than other types of loans.