$100,000 home equity loan vs. $100,000 HELOC: Which is better for 2025?
Borrowing $100,000 can often be an arduous process. And, in today's elevated interest rate climate, it can also be an expensive one. With credit card interest rates hovering near a record 23% and personal loan rates closing in on 13%, there aren't many cost-effective and simple ways to borrow a large, six-figure sum of money currently. Homeowners, however, have two relatively inexpensive options to explore: home equity loans and home equity lines of credit (HELOCs). Both use the owner's accumulated equity as a funding source and both come with interest rates significantly lower than most alternatives.
That said, these products operate in different ways, and they come with unique pros and cons in the interest rate environment of early 2025. So, prospective borrowers need to explore both before applying. But which will be better for 2025? A $100,000 home equity loan or $100,000 HELOC? That's what we'll explore below.
Start by seeing how much home equity you'd be eligible to withdraw here.
$100,000 home equity loan vs. $100,000 HELOC: Which is better for 2025?
While it's impossible to determine an answer that applies to all borrowers, both home equity borrowing options offer homeowners an advantageous way to borrow $100,000 this year. Here's when either could be the better choice in 2025:
Why a $100,000 home equity loan could be better for 2025
A $100,000 home equity loan could be better than a HELOC this year for one major reason: The home equity loan rate is fixed while the HELOC one is variable. When borrowing such a large amount of money, you'll want to be able to determine with precision what your payments will be and what they will remain for the life of the loan. That's impossible to do with a HELOC but easy to do with a home equity loan. But it doesn't need to mean losing out on lower interest rates, either, as lenders generally will allow borrowers to refinance their home equity loan in the future, should interest rates drop then.
The average home equity loan rate currently is just 8.45%, making it a cost-effective way to borrow $100,000. Qualified borrowers may be able to find a rate even lower by shopping around and comparing lenders and terms. So, if you know you want to borrow $100,000 from your home's equity but want to have the security and predictability of a fixed interest rate, a home equity loan could be better for you this year.
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Why a $100,000 HELOC could be better for 2025
A $100,000 HELOC, on the other hand, could be the better option for borrowers looking to pay the least amount of interest. Currently, the average HELOC interest rate is just 8.28%, almost 20 basis points lower than what's available with a home equity loan. And while that may not seem like a lot on paper, it could add up to significant savings over the life of the credit line. With additional interest rate cuts still possible for later this year, then, HELOCs could also become even cheaper as rates fall. Borrowers won't need to worry about refinancing – or have to pay for home equity loan refinancing closing costs either – since HELOC rates change independently each month.
Still, a variable rate, even if it's relatively low at the start of 2025, poses inherent risks and those risks are greater when borrowing $100,000. Should the economy change in the months and years ahead, a $100,000 HELOC could become hard (if not impossible) to pay off. So that lower rate will need to be weighed carefully against what can be secured now with a fixed-rate home equity loan.
The bottom line
The decision between borrowing $100,000 with a home equity loan or HELOC is a personal one dependent upon multiple timely considerations that will inevitably evolve this year. So crunch the numbers, shop for rates, and consider speaking to a lender who can answer your questions. It's vital to get as much accurate information gathered as possible before proceeding. Since your home functions as collateral in these exchanges, you could lose it back to the lender if you're unable to make all of your payments.
