Upon acquiring a home equity loan, the equity is coverted into cash, and repayments are dependent on the written agreement between the borrower and the lender. Typically, homeowners acquire these loans for various purposes. The most common uses for these loans include debt consolidation, home improvement, education expenses, and medical bills.

Scammers typically target senior citizens, minorities, and new homeowners with their different strategies. Seniors are most vulnerable to these tactics, as they have often paid off their mortgages and have full ownership of their property. Most of the time, these individuals are also easy prey, due to their lack of experience in complicated credit issues.

A home equity loan enables an individual who currently owns a home to borrow money, and utilize the home's equity as collateral. Equity, on the other hand, is the amount of the home's actual market value, deducted from how much the borrower owes on the original mortgage. A house's market value also illustrates how much it is currently worth in the market at large.

The first thing that lenders look for is the borrower's creditworthiness. An individual's creditworthiness consists of three main components: credit history, monthly income, and loan-to-value ratio. Lenders want to know how potential customers are able to handle their bills. They want to know how much debt these prospects have, and if they have the ability to make timely payments. In order to find out, they will need to secure a copy of the individual's credit report, illustrating their entire credit history. A person's credit history includes the dates of when accounts were opened, the balances that are currently owed, the amounts of their credit limits, payment schedules, and if they have been paying on time.