3 borrowing options HELOCs are cheaper than right now

Borrowing from your home equity is always an option worth considering — but it's particularly appealing when home values are high and, thus, home equity borrowing levels are elevated. And that's the case now after a report released in early March showed the average home equity amount sitting around $313,000. That's up 6% year-over-year, giving homeowners a viable borrowing alternative to explore. Even with home equity lenders typically mandating a 20% equity buffer be left in the home, that still results in a six-figure sum of money to utilize now.

A home equity line of credit (HELOC) could be the smart way to do so. Now with an average rate of just 8.01%, HELOC rates have been steadily declining over the past six months and are down almost two full percentage points since September 2024, and they could fall further this April. To fully understand how much cheaper HELOCs have become, however, it helps to compare them to some popular alternatives. Below, we'll detail three borrowing options that HELOCs are cheaper than right now.

Start by seeing what HELOC rate you'd qualify for here.

3 borrowing options HELOCs are cheaper than right now

Not sure if a HELOC is truly your least expensive borrowing option now? Compare it to these three alternatives:

Credit cards

In 2024, credit card interest rates surged to a record average of 23.37% and have hovered near that high since, making the average 8.01% HELOC rate almost three times less expensive. And only HELOCs are poised to become materially cheaper if factors like inflation and Federal Reserve rate policy adjust downward. Credit card rates, meanwhile, are more closely aligned with the prime rate, meaning borrowing costs there will remain elevated for the foreseeable future. Understanding this, then, homeowners in need of financing for home repairs, renovations, or even to consolidate high-rate debt may be better served by exploring their HELOC options.

Start shopping for a HELOC online today.

Personal loans

Personal loans are significantly less expensive than credit cards … but still significantly more expensive than HELOCs. The average personal loan interest rate is now 12.37%, according to Bankrate, making it more than four percentage points higher than HELOCs. While that may not seem like a lot on paper, it can add up to significant sums of interest paid over 10 or 15 years (the length of the average HELOC repayment period). Still, personal loans are unsecured and HELOCs are secured by your home, so if you're not comfortable risking the latter, the difference in rates and payment costs may be worth it to you.

Home equity loans

Home equity loans have the least expensive rates out of the three options on this list. But they're still not cheaper than HELOCs. The average home equity loan interest rate is 8.37% now, making it .36% more expensive than a HELOC. But the details here are significant. While that may be the average home equity loan rate, it's higher for two common repayment periods: 8.50% for a 10-year home equity loan and 8.44% for a 15-year one. Still, home equity loan rates are fixed and HELOC rates are variable. So if you want to borrow at an affordable rate but don't want to be worried about rate volatility ahead, this could be one of your better options now.

What about cash-out refinancing?

Technically, a cash-out refinance, in which you take out a new mortgage loan, pay off your mortgage balance and keep the difference as cash, will come with a lower interest rate than a HELOC does now. The average 30-year mortgage rate is 6.71% now while a 15-year mortgage rate is just 5.96%. But while those may be lower than HELOC rates, they're likely both higher than what you already have locked in as your current mortgage rate. 

If you have a mortgage under either of those figures, then, exchanging it for a higher one to get that cash doesn't make sense. In these scenarios, it's likely to be more cost-effective to borrow with a HELOC even if, technically, HELOC rates are higher than mortgage rates now.

Calculate your potential HELOC repayments here.

The bottom line

In the interest rate climate of spring 2025, HELOCs are cheaper than credit cards, personal loans and home equity loans. And, because they won't require homeowners to exchange their current mortgage rates, they're generally more affordable than cash-out refinances, too. Still, your home is the collateral when borrowing like this so it's critical that you calculate repayment costs against what's available now and what HELOC rates could be in the future to more precisely determine long-term affordability.