What is an Equity Loan?

An equity loan is like a mortgage. It means that the ownership of the real estate is transferred from one person to another in exchange for money. An example of such is, say an individual owns a property without a lien, he then has the option to apply for an equity loan amounting to a specific percent of the value of the property in return for a lien on the property's title decided by the loan provider.

Many equity loan providers ask the borrower to pay an equivalent of an interest on top of the loan every month. The borrower can also add extra funds to the loan principal, which effectively reduces the interest's amount which will be calculated from the day the surplus fund is added onwards.

Even people with not so good credit history can get an equity loan. The interest rate which will be applied to the equity loan is normally lower than the interest rate on unsecured loans.