Difference Between Home Equity Loans & A Normal Loan

Difference Between Home Equity Loan And A Normal Home Loan

The home equity loan differs from a normal home loan in a number of ways:

Normal Home Loan	Home Equity Loan
A normal home loan is given for the purchase of a property.	A home equity loan is given against an existing property of the customer.
In a normal home loan, the agreement value of the property is taken as a benchmark.	In a home equity loan, the finance is against an existing property, and hence the property needs to be valued by an approved valuer. Therefore, the loan is based on current market value.
In a normal home loan, the end use of the loan amount is monitored to ensure that the loan is actually used to pay the seller for the property.	In a home equity loan, the end use is not monitored and you can utilize these funds to meet any of your financial requirements.
They are not risky.	They are risky for both the lender & the borrower.
They can only be used to buy property.	They can be used as consumer loan, means you can use it in many ways like for home renovations, for education, as auto loans, as wedding loans, for medical bills or for any other big purchase.
You can qualify them with some efforts.	It is much easier to qualify because they are backed by the equity in your home.
Usually they are not tax deducible.	Under most circumstances, home equity loans are tax deductible.