With a home equity loan, you borrow money using the equity in your home as collateral. Many homeowners use a home equity loan to pay for major expenses such as home improvements, automobiles, vacations, college tuition, or weddings; or to consolidate existing debt at a lower interest rate. A home equity loan is considered a second mortgage.

There are two types of home equity loans:

• A home equity line of credit (HELOC) works like a credit card, but features a lower, variable interest rate. It offers more flexibility than a traditional home equity loan, because you can draw cash as you need it, and only pay interest on the amount you borrow.
• A traditional home equity loan allows you to take a large lump sum of cash, and repay it in monthly installments at a fixed interest rate. The loan term is usually 10 to 15 years.

A home equity loan may be right for you if you want money fast. Most home equity loans can be approved and funded faster than refinancing your mortgage.