There are two common types of home equity loan, each with its own unique characteristics and benefits, depending on your needs and situation.

• Traditional or Second Mortgage
  In this loan situation you receive a single lump sum of money, which is paid back over a fixed period of time. Interest begins accruing immediately after you receive the funds.



• Line of Credit
  A home equity line of credit, is very different from the second mortgage. In this type of loan agreement, your lender provides you with a 'credit card' or checkbook, to use if and when you need or decide to use it. No interest accrues until you actually make a purchase.

Sounds straight-forward enough. But, homeowner beware! The lending industry is highly competitive and it could be a costly mistake to start the process of loan shopping without knowing What Are the Pitfalls of Equity Loans?