Function

• Home equity loans are issued through banks and other financial institutions. To apply, you will need proof that you own the home, documentation of any loans that use your home as collateral and a recent home appraisal. You will also be required to prove your employment situation, and income and the lender will pull your credit report. The better your credit score, the better your chances of getting a low interest rate.
  
  

Size

• The amount that you can borrow with a home equity loan depends on your home's value, the amount of money you owe that is secured by your home and the percentage if your equity that a lender will allow you to access. For example, a lender may only let you access 80 percent of your home's value, and if your home was worth $300,000 your maximum home equity loan would be $240,000. However, if you still owed $140,000 on your mortgage, your loan limit would drop to $100,000.
  
  

Uses

• People can use their home equity loan for any purpose, such as paying for home renovations, kids' college expenses or a family vacation. Many people also use home equity loans for consolidating their debt. Because a home equity loan is secured by a home, home equity loans typically offer lower interest rates than credit cards or other unsecured loans. However, if you default on a home equity loan, your home can be taken.
  
  

Time Frame

• The time frame for repaying a home equity loan varies widely. For some loans, the repayment period can be as short as one year while other loans can have repayment periods of up to 30 years. The time frame often depends on how much you are borrowing.
  
  

Warning

• Even though a home equity loan make offer a lower interest rate than other forms of funding, home equity loans are riskier for borrowers because the home is used as collateral. If you default on a credit card, you do not lose your home. If you transfer that credit card debt to a home equity loan and then default, your home can be foreclosed on.