Home equity loans have quickly become the number one way to get your hands on cash that you need to pay down bills or add an addition onto your home.

A home equity loan is a lump sum loan for the amount of equity in your current home. It's determined by taking your homes current value and subtracting the mortgage balance.

These types of loans will generally have a fixed interest rate and be for 5, 10, 15 or 20 years. There are also numerous tax benefits with home equity loans that are very advantageous to the home owner.

Funds from the loan can be used for things such as:

Debt consolidation

Medical bills

Home remodeling projects

College expenses

People will also use this money for new vehicles and even lavish vacations. However, unwise that may be. You can easily find yourself getting into serious financial troubles by making outlandish purchases that you would never normally make.

Even with the many great benefits of home equity loans, there are some downsides. Some of these include:

- You're putting your home up as collateral. If you were to happen to default on the loan, you could face losing it.

- If you take out a $25,000 home equity loan and pay it down to $10,000, but need more money later, you'll have to refinance in order to get the additional cash. This will most likely lead to loan closing fees and other charges.

Even with that being the case, a home equity loan can be a huge benefit to getting the funds you need for important purposes.

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