Home equity loans work by converting the equity you have built in your house into a single lump sum payout of cash. You repay the borrowed amount over a fixed term, usually between five and thirty years, with fixed interest rates and predictable monthly payments. Your home serves as collateral, meaning the lender holds a legal claim to your property until the loan is fully repaid. Because the payment stays the same every month, budgeting for this loan is straightforward and predictable.