Why use a home equity loan?

Many people take advantage of this financial instrument for renovations or the purchase of a car. Because it is secured to a house - for most people, the largest asset they'll ever possess - this type of loan allows for a longer amortization. The typical car loan is amortized for a maximum of seven years; with a home equity loan, you can amortize it up to 25 years. You can make smaller payments over an extended period, but that also means you'll incur more interest.

After 25 years, you're obliged to renegotiate your loan. But there's nothing stopping you from reapplying sooner. If you got a $50,000 home equity loan five years ago and in the interim repaid $30,000 of it, you can apply to be bumped back up to the $50,000 plateau, but at more current rates (which can be good or bad, depending on the economy).