Equity Loans are mortgages that are placed on real estate properties in exchange for cash to the borrower. You are using your home's equity as the collateral to get the loan. What is equity?

Understanding Equity Loans
It is the difference between the home value and how much you owe on the mortgage(s). If you buy a house for $150,000 and make a down payment of $15,000 then you are borrowing $135,000, which will be paid back. The day of the sale, the equity is the same as the down payment – the difference between how much the home is worth and how much you owe: $15,000 equity. However, equity changes through the years. If you make your payments regularly, then you owe less. Let's say a few years later you have paid down $35,000 more of the mortgage debt. (You have paid $50,000) However, the value of your home has now increased to $200,000. The equity is still figured out by the same formula: the current appraised value ($200,000) minus the amount owed ($150,000) leaves you with equity of $50,000.

Equity loans is basically a second mortgage that lets you turn your equity into cash. Your collateral is your house, just as with the original mortgage. You're cashing in the money you already have paid, and can use it for anything from debt consolidation, to expenses, education or even home improvement. Equity loans could be in the form of home equity loans or home equity lines of credit. Equity loans are usually paid back much sooner than the original mortgage, though some can take as long as fifteen years.

Which Is Better?
A home equity loan is a one-time lump sum loan that you pay off over a set amount of time – yes, with an interest rate and a fixed payment each month. After you get this equity loan you cannot borrow any more money from the same loan. A home equity line of credit offers more flexibility and works like a credit card, with a revolving balance. This type of loan allows you to borrow up to a certain amount for the entire life of the mortgage, as determined by the lender. As you pay off the principal you can reuse the credit just like a credit card.

Where can you find cheap home equity loans? Bankrate.com and LowerMyBills.com are two websites that can help you find equity lenders as these loan sites survey lenders on a regular basis. If you have a solid amount of equity built up, then use it as needed!