Answered

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What is a primary characteristic of a home equity loan?
A) It is a loan based on the value of the borrower’s car.
B) It requires the borrower to pledge their home as collateral, using the home’s equity.
C) It is an unsecured loan that does not require any collateral.
D) It is a short-term loan with a very high interest rate.

Sagot :

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Final Answer:  

The primary characteristic of a home equity loan is B (It requires the borrower to pledge their home as collateral, using the home’s equity).

Explanation:

A home equity loan is a type of loan in which the borrower uses the equity in their home as collateral. Equity refers to the difference between the home's market value and the outstanding mortgage balance. This loan allows homeowners to borrow against this equity, typically at a fixed interest rate, and receive a lump sum of money. Since the loan is secured by the property, it generally offers lower interest rates compared to unsecured loans. The primary characteristic is that the home serves as collateral, meaning that if the borrower defaults on the loan, the lender can foreclose on the property to recover the owed amount. This makes option B the correct answer.

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