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A home equity loan is a type of loan in which the borrower uses the equity in their home as collateral. These loans are usually taken for a finance major home repairs, medical bills or college education. Home equity loans are most commonly second position liens (second trust deed), although they can be held in first or, less commonly, third position. home equity loans are closed-end loans in that you receive the money when the loan is funded. You borrow a lump sum and pay it back over a period of years with interest. The interest rate for these products is fixed.
Most home equity loans require good to excellent credit history, and reasonable loan-to-value and combined loan-to-value ratios. Home equity loans come in two types, closed end and open end. A closed-end home equity loan, or term loan, is provided to you as a one-time lump sum that is paid off over a set period of time, with a fixed interest rate and equal payments each month. Once you get the money, you cannot borrow further from the loan. Open equity loans work more like a credit card. You are allowed to borrow up to a certain amount over the life of the loan - a time limit set by the lender. Credit lines have a variable interest rate that fluctuates over the life of the loan. Payments will vary depending on the interest rate and how much credit you have used. When the life span of a line of credit has expired everything must be paid off. A lender may or may not allow a renewal.
For people who want simplicity and speed, Beneficial offers unsecured loans. That means you don’t need to use your home as collateral. It is simple because there’s no title search and no home appraisal.