Current home equity loan rates

Home equity loan vs. home equity line of credit 

If a home equity loan doesn’t seem like a good fit, you can also tap into your home’s equity through a home equity line of credit (HELOCs). Like home equity loans, HELOCs allow you to borrow based on your home equity, with your house as collateral. However, some key factors set them apart. HELOCs provide revolving credit, so you can withdraw from the HELOC as needed during a set withdrawal period instead of borrowing one lump sum.

Interest rates also work differently between these two types of loans. Home equity loans typically have fixed interest rates, meaning monthly principal and interest payments remain consistent throughout the repayment period. HELOCs typically have variable interest rates that can change over time.

Learn More: Home equity loan vs Home equity line of credit (HELOC)

Pros and cons of home equity loans

Home equity loans may offer more stability than HELOCs in some cases because it is common for interest rates and the principle and interest monthly payments to stay consistent over time.

There may be some inflexibility to home equity loans that can lead to a few downsides. For example, you can only borrow a fixed amount and receive it all at once. That means if the scope of a home improvement project or other expense grows, you’ll have to find an additional funding source. 

Both home equity loans and HELOCs come with the risk of losing your home, though this is a worst-case scenario.

Pros and cons of HELOCs

On the flip side, HELOCs may offer more flexibility than a home equity loan. Because you can take out funds as needed, you only have to repay  on the amount you actually spend. You can begin paying interest immediately, but payments on your principal typically don’t start until after the withdrawal period. This might make a HELOC a good option for longer-term home renovations with uncertain budgets.