HELOC and home equity loans tend to be lower than other borrowing options, but one could be more affordable than the other right now.
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The average homeowner has $213,000 in tappable home equity, according to the latest Intercontinental Exchange (ICE) Mortgage Monitor report. And, that amount of home equity could come in handy for homeowners looking for low-cost financing, especially as interest rates across other borrowing products remain high. Take, for example, today's average credit card interest rates, which are sitting above 21%, while average personal loan rates are hovering slightly above 11%. In comparison, home equity borrowing options provide notably cheaper rates.
On the other hand, both home equity line of credit (HELOC) and home equity loans have average rates that are just over 8% currently, according to the latest data. These lower average home equity borrowing rates can make tapping into your home equity the more affordable option, whether you need to consolidate debt, complete a home renovation project or access funds for another purpose.
But while both HELOCs and home equity loans allow homeowners to borrow at a low rate, the affordability depends on a combination of rates, repayment terms, fees and your credit profile. Given these factors, is a HELOC or a home equity loan more affordable this September? We spoke with home lending experts to break down what to consider between the two options.
Compare your home equity borrowing options to find the right fit now.
HELOCs vs. home equity loans: Which option is more affordable this September?
HELOC and home equity loan interest rates tend to be lower than other borrowing options, but they're still impacted by the Federal Reserve's rate decisions. So, while the Federal Reserve has kept the federal funds rate the same throughout the year, home equity rates have also roughly stayed in the same range, but there might be a reprieve in sight.
The odds of a Federal Reserve rate cut in September are high currently, according to the CME Group's FedWatch tool. If the Fed does finally decide to cut rates, rates on borrowing products, including HELOCs and home equity loans, could fall in tandem. But even if that happens, there are still factors to consider when comparing the affordability of HELOCs and home equity loans, including:
HELOC and home equity loan interest rates
"The rates for both of these two products are lower than a year ago," says Nadia Evangelou, senior economist and director of real estate research at the National Association of Realtors (NAR).
That's a good starting point for borrowers who are looking for competitive rates. And, at an average of 8.10% (as of September 3, 2025), HELOC interest rates are currently a bit lower than home equity loan interest rates. But there's a major point to consider. HELOC rates can change over time based on market conditions as they're variable. Home equity loan interest rates don't change and remain fixed over the life of your loan.
Mark Worthington, a loan officer and branch manager at Churchill Mortgage, notes that many factors go into the decision when choosing between a HELOC and a home equity loan.
"But from a rate standpoint, when rates are increasing, home equity loans become more popular. When rates are decreasing, home equity lines of credit become more popular," says Worthington.
So while a rate cut may be on the horizon, HELOCs may seem more attractive. Home equity loan rates may drop, too, but they're fixed, so you lock in a rate, even if there are further cuts in the future. On the other hand, when rates increase, HELOC rates can jump significantly, while home equity loan interest rates remain the same. But whether you go with one or the other is just as much about math as it is about mindset.
"A HELOC may look more affordable in the short term, but a home equity loan may feel safer, even if the rate is a little bit higher," adds Evangelou.
Learn how affordable your home equity borrowing options could be today.
HELOC and home equity loan repayment differences
Aside from interest rate differences, there are major repayment differences between a HELOC and a home equity loan to consider as well. Home equity loans offer predictable payments throughout the repayment term, and the repayment terms can span between five and 20 years.
HELOCs come with two separate periods: the draw period and the repayment period. In the draw period, borrowers can access their line of credit and make interest-only payments. The appeal of a HELOC is that you can use the remaining available credit at any point during the draw period, which is generally 10 years.
Once you hit your repayment period, you won't be able to borrow from your line of credit and must start paying both the principal and interest on your HELOC. Repayment terms on a HELOC vary, but could be up to 20 years. Your payments could change drastically from the draw period to the repayment period if you only paid the interest, or if rates have changed since you opened your HELOC.
You also have to be ready for payment increases if there's a rate hike.
"The downside is if rates tick up, so do your payments, which can sting if your budget's tight," says Steven Glick, director of mortgage sales at HomeAbroad, a fintech company that specializes in mortgages for U.S. real estate investors.
While the Fed is likely to cut rates later this year, if inflation continues to rise, it could increase the likelihood that further rate hikes occur in the future.
Additional costs to consider
When looking at which option is more affordable this September, it's important to go beyond interest rates. Both HELOCs and home equity loans have additional costs to consider.
"Some hidden costs that people have to expect are closing costs, origination fees, and sometimes appraisal costs. Even if rates look lower, those extras can eat into the benefit," says Evangelou.
HELOC and home equity loan closing costs are typically within a close range of each other. However, HELOCs may have extra fees, including an annual fee, an inactivity fee, a transaction fee and a termination fee.
How to decide between HELOCs and home equity loans
Both HELOCs and home equity loans can be cost-effective financing solutions. Which one is more affordable, though, depends on the lender, your credit score, interest rate and your repayment approach.
"For long-term affordability, I'd say home equity loans win for folks planning ahead, while HELOCs suit those who can pay off quicker and handle potential hikes," says Glick.
Which option is best for you can also depend on the reason for borrowing.
"HELOCs shine for borrowers who need flexibility, like someone renovating a home in phases or covering unpredictable expenses, such as medical bills or college tuition. If you're comfortable with variable rates and plan to pay off within the draw period, it's a winner," Glick says.
If a lump sum is preferable to consolidate debt, buy a car or pay for a wedding, Glick says that a home equity loan is a better option.
The bottom line
If you're considering a home equity line of credit or a home equity loan, be sure you understand the financial implications. A home equity loan can provide predictable payments and a solid plan to stick to. HELOCs, on the other hand, provide borrowers with more flexibility, but that can be a double-edged sword. To ensure you can stay on top of your payments, aim to pay more than just the interest during the draw period.
"Homeowners need to remember both are secured by their home. So that means if they fall behind on payments, they risk foreclosure … so affordability isn't just about the rate, it's about the comfort level with repayment that they can have," Evangelou says.
