Anna and Ken go to their bank for a home equity line of credit and they can use their Home as collateral and use the money to pay for emergency medical service.
What is a home equity line of credit?
A Home Equity Line Of Credit (HELOC) is a loan in which the lender agrees to lend a maximum amount within an agreed period of time to a borrower, where the collateral is the borrower's equity in their house.
Home is often a consumer's most valuable asset, thus, many homeowners use home equity credit lines only for major items, such as medical bills, education, home improvements, and choose not to use them for day-to-day expenses.
What does collateral mean?
Collateral is an asset, such as a home or car, that a borrower offers up as a way to qualify for a loan. Collateral can make a lender more comfortable in extending the loan since it protects their financial stake if the borrower ultimately fails to repay the loan in full.
Thus, Anna and Ken go to their bank for a home equity line of credit and they can use their Home as collateral and use the money to pay for emergency medical service.
Hence, from A, option 2 is correct and from B, option 3 is correct.
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