Home equity loans vs. HELOCs: What's the better borrowing option this April?
In the high-interest-rate environment of April 2025, borrowing money can be expensive. Personal loans, for instance, currently carry rates of over 12%. And
credit cards
? Those average nearly double that. Homeowners, though, are lucky. They have access to a type of borrowing that's often more affordable than more traditional options.
It's true: With
home equity loans
and home equity lines of credit (
HELOCs
), homeowners can often borrow money at
interest rates
well under 10%.
Still, while these products can both save you on interest, they're not the same. Below, we'll break down how to choose between a home equity loan and a HELOC this April.
Start by seeing how much home equity you could borrow here
.
Not sure which of these home equity borrowing products could work better for you now? Here's what to consider:
HELOC rates are currently
slightly lower than those on home equity loans
so that right there will save you cash. But on top of this,
HELOC rates
are also
variable
— meaning their rate will usually go up or down based on market conditions and, mainly, the actions of the Federal Reserve.
With the Fed poised to reduce rates later this year — the majority of members expect at least one more rate cut — that
would likely mean lower HELOC rates, too
.
"I believe we are likely to see interest rates continue to come down over the coming six to 24 months, so a HELOC may be more favorable at this time," says Evan Luchaco, a home loan specialist at Churchill Mortgage.
Keep in mind that rates change often, though, so if rates begin to creep up again and you're not able to pay off the balance fast, it could have an adverse effect, resulting in significantly more costs in the long run.
"HELOCs are generally best when a borrower knows that they will be able to pay the new debt off quickly," says Kevin Leibowitz, a mortgage broker at Grayton Mortgage.
See how low of a HELOC rate you could qualify for here
.
If you're planning on keeping your home equity product for a while and need an extended period to pay it off, a home equity loan may be the better choice.
"If a borrower knows that the new debt will be in place for a number of years, then the home equity loan might become a better option," Leibowitz says. "The rate and payment won't change."
It's also better for the more risk-averse consumer who might not be fully secure in their financial situation. "For the customer who is more conservative financially, a home equity loan is often a more sensible route," Luchaco says. "It provides a secure interest rate."
You'll likely want a HELOC if you need a "just-in-case" fund or some financing on hand for unexpected expenses.
"A HELOC can be considered an emergency fund if someone doesn't have one or doesn't have the means to set one up very quickly," says Patti Brennan, CEO at Key Financial. "For example, if/or when we go into a recession and downsizings occur, your boss won't really care if you have money in the bank or a means to pay your bills — but you should."
HELOCs can also be the better choice if you have an expense that's extended — a long-term home renovation or recurring tuition payments, for instance.
As Aaron Craig, vice president of mortgage and indirect sales at Georgia's Own Credit Union, put it, "If you're not quite sure how much home improvements are going to cost and would like some flexibility to borrow as much or as little as you need as the project progresses," HELOCs can be a good choice now.
Finally, if your goal is to
consolidate high-interest debts
right now, experts say you're better off using a home equity loan than HELOC.
"A HELOC can ultimately be dangerous when used to consolidate debt and alleviate monthly payments, but the homeowner doesn't change their spending habits," Luchaco says.
This is because HELOCs allow you to keep borrowing money, usually for
up to 10 years.
If you pay off your debts and then continue to use those HELOC funds for other non-essential purchases, you could end up with a bigger problem than before.
"Eventually, that type of homeowner will get themselves into trouble again and inevitably need to sell their home in order to use their remaining equity to pay off the newly acquired debt — or end up in some sort of financial hardship," Luchaco says.
Every situation is different, and there are lots of factors to take into account when borrowing from your home equity. If you're not sure which is best for you, talk to a home equity lending professional. They can walk you through your full scope of options and help point you in the right direction both this April and, hopefully, long-term.
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