3 Timely Home Equity Loan Benefits That HELOCs Don’t Offer

When considering your borrowing options, there are many things to consider. In addition to the interest rate you’ll pay to borrow money, you’ll also need to consider the type of payment that comes with your credit (fixed or variable) and the budget you’ll need to pay back what you borrow. But in today’s climate of high rates, there aren’t many viable options to choose from. With credit card rates around 20% currently and personal loan rates above 12%, neither offers borrowers a cost-effective way to make ends meet.

Home equity loans for homeowners, however, can. Home Equity Loans And Home Equity Lines of Credit (HELOC) are both worth pursuing right now. However, timing is key here and there are compelling arguments that home equity loans provide faster benefits than HELOCs. Below, we’ll detail three of these benefits for homeowners to evaluate.

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3 Timely Home Equity Loan Benefits That HELOCs Don’t Offer

Here are three important advantages of home equity loans over HELOCs in today’s unique economic climate:

Lower rates

Although HELOCs often have lower interest rates than home equity loans, this is not currently the case. The average home equity loan interest rate is 8.66% while the average HELOC rate is 9.89%. With some negative economic news, the average HELOC rate could soon easily reach double digits.

While that 1.23% rate difference may not seem substantial on paper, it will be in the time it takes to pay back what you borrow. And with interest rates seemingly high for all borrowing options right now, it’s up to homeowners to opt for the lowest rate available.

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Fixed rates

Not only will this lower home equity loan rate save you more money, both in the long term and on your monthly payments, but it will fixed until you pay it (or until you refinance). This is a major advantage in today’s economy with federal funds rate already at its highest level in 23 years – and the prospect of this rate increasing increases by the day. If this happens, the rate of a HELOC will also increase, thanks to its variable nature. However, the lower rate for home equity loans will remain the same.

Predictability

The more predictable your monthly expenses are, the easier it will be to budget for them. This is always important, but especially in today’s inflationary climate. Unexpected expenses could mean the difference between making ends meet and not. A HELOC, with its higher variable rate, should therefore be avoided. However, a home equity loan will be easy to budget for because you’ll be able to predict exactly what you’ll pay each month – and when that loan will be paid off in full.

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The essential

It’s always a good idea to be judicious about your borrowing options. But in today’s economy, where interest rates could soon rise again, it’s a must. For homeowners, borrowing against the accumulated equity in their home can be a cost-effective way to access additional funds. But since their home is the collateral in these circumstances, any borrowing must be done intelligently and carefully. It is therefore important to understand that home equity loans are simply the best, most timely option right now. Thanks to the combination of lower fixed rates and their predictable nature, homeowners considering accessing their equity should seriously consider home equity loans over HELOCs now.