What is a home equity loan and when makes sense?

A home equity loan lets you borrow against the difference between your home's current market value and what you still owe on your mortgage. For example, if your home is worth $400,000 and you owe $250,000, you have $150,000 in equity and could potentially borrow a portion of that as a lump sum at a fixed interest rate, repaid over a set term. It makes sense when you need a large sum for a specific purpose like home renovations, consolidating high-interest debt, or covering major expenses like medical bills or education. Since the loan is secured by your home, interest rates are typically lower than personal loans or credit cards. However, you risk losing your home if you default, so it should only be used for worthwhile, planned expenses.