Other Topics >> Home Equity Loans Home equity loans are a type of loan which uses the portion of your home that you own as the collateral for the loan. Collateral refers to assets which the bank can use to cover the default risk of the loan; so for example if the borrower is unable to repay the loan, the bank is entitled to the collateral – in this case your ownership stake (equity) in the house. A home equity loan is distinct from a mortgage or regular home loan and is typically used to pay for projects that would be expensive to finance with a credit card or other short-term loan, such as home improvement and remodeling, medical costs, etc. The borrower is typically required to have good credit. A home equity loans may also be called second mortgage, although this term is fairly broad. (read more)