EQUITY LOAN Meaning and
Definition
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An equity loan, also referred to as a home equity loan or a second mortgage, is a type of loan in which a borrower uses the equity they have built up in their property as collateral. Equity is the portion of the property's value that is not encumbered by any existing mortgage or loan, and it is calculated by subtracting the outstanding loan balance from the property's current market value.
When obtaining an equity loan, a borrower can typically receive a lump sum payment from the lender, with the loan amount being determined by the available equity in their property. The borrower then agrees to repay the loan over a set term, usually through fixed monthly payments.
One of the primary advantages of an equity loan is that it allows homeowners to access the value of their property without having to sell it. This can be particularly useful when funding home improvements, paying for education expenses, or consolidating higher-interest debt.
Interest rates for equity loans are generally lower than those for unsecured loans since the property serves as collateral, offering security to the lender. Additionally, the interest paid on equity loans may be tax-deductible, depending on the jurisdiction and the purpose of the loan.
It is vital for borrowers to carefully consider the terms and conditions of an equity loan, as defaulting on payments can result in the loss of their property through foreclosure. Therefore, borrowers should ensure they have a steady income and a reliable repayment plan before committing to an equity loan.
Common Misspellings for EQUITY LOAN
- wquity loan
- squity loan
- dquity loan
- rquity loan
- 4quity loan
- 3quity loan
- e1uity loan
- e2uity loan
- ewuity loan
- eauity loan
- eqyity loan
- eqhity loan
- eqjity loan
- eqiity loan
- eq8ity loan
- eq7ity loan
- equuty loan
- equjty loan
- equkty loan
- equoty loan
Etymology of EQUITY LOAN
The word "equity loan" combines two different terms: "equity" and "loan".
1. "Equity" originates from the Latin word "aequitas", meaning fairness, impartiality, or justice. It developed into the Old French word "equité" and then passed into Middle English as "equite". The term "equity" refers to fairness, justice, or impartiality in various contexts, including law and finance.
2. "Loan" comes from the Old English word "lǣn", which meant "something lent" or "to lend". It shares a common origin with the Old Norse word "lánn" and the German word "Leihen". "Loan" generally refers to the act of lending or borrowing money, typically involving repayment with interest.
