What is a home equity loan?

A home equity loan refers to a financial product that allows homeowners to borrow money by leveraging the equity they've built up in their property. Equity is the difference between the market value of the home and the remaining balance on any existing mortgage. By using the homeowner's equity as collateral, lenders offer a lump sum loan, which typically has lower interest rates compared to unsecured loans because the loan is backed by an asset.

In this context, the other options don't fit the definition of a home equity loan as they describe different scenarios. Property insurance as collateral refers to a situation that protects the lender's investment, personal savings relates to funds that one has available, and loans for home renovations suggest a specific use rather than a general borrowing condition based on equity. Thus, the correct answer accurately captures the essence of a home equity loan.