Which type of equity loan is right for you? It depends on the purpose for the loan and how long you need the money.

The tax deductibility and low interest rates of a home equity loan make it attractive. What do most people use the money for? We look at the common reasons people borrow against their equity and also show which type of loan -- the lump-sum equity loan or the little-at-a-time HELOC -- is best suited to the purpose. We also point out the pros and cons of these loans in a simple manner.

What you can expect to learn from this chapter:

Why people borrow against their equity   Home improvements, debt consolidation or a new car are just a few of the reasons people take out a home equity loan. Pros and cons of debt equity   A simple chart lays out the pros and cons of debt equity -- including the fact that you could lose your house if you default on the loan payments. 5 questions to help choose a loan or line of credit   Lump sum or a little at a time? Short term or long term? These are some of the considerations when you're deciding which loan to choose. Chapter 2 quiz   The situations described in this quiz will tell you if you've learned which type of home equity loan to choose.