What’s A Home Equity Loan? A home equity loan is a loan where you, as the home owner and borrower, use the equity in your home as collateral for the loan. If you take out a home equity loan, it will create a lien against your property and in effect, reduce the actual equity you have in it. Such a loan is often referred to as a second mortgage, because it’s secured against the value of the property, just like a traditional mortgage. Often, home owners will take out home equity loans for large home repairs or to pay bills. As with any loan, careful consideration must be given before taking out a loan against your home. Make no mistake, the security for a home equity loan is your house. When it’s used as collateral, and if you are unable to make the payments, the lender will take possession of your most precious asset to satisfy the loan. I think it’s quite a risky set up, so think hard before pursuing something like this! Home Equity Loan vs Home Equity Line of Credit (HELOC)