What is the structure of a home equity loan?

A home equity loan is structured like an installment loan, which means that borrowers receive a lump sum of money upfront and then repay it through fixed monthly installments over a predetermined period. This structure allows borrowers to plan their finances more effectively, as they know the exact amount owed each month and the loan repayment term.

Unlike revolving loans, home equity loans do not allow for borrowing against the equity in the home multiple times after the initial amount taken; rather, they provide a one-time loan that is fully disbursed at the beginning. This differs from options that might imply more flexibility or continuous access to funds, such as revolving credit lines. Home equity loans typically also involve a fixed interest rate, making them easier to budget against.

In terms of the other options, the structure clearly rules out revolving loans with variable payments as it emphasizes fixed installments. The mention of rental agreements is irrelevant as it does not pertain to home equity loans, which are based on ownership and equity in property. Additionally, most lenders do require a credit check to evaluate creditworthiness before granting a home equity loan, indicating that a no credit check requirement would not align with standard lending practices.