As HELOC rates fall, is a home equity loan still worth it?
Interest rates on home equity lines of credit (HELOCs) are seemingly declining on a weekly basis. Hovering near 10% in early September 2024, HELOC rates are now poised to fall below 8%, perhaps as soon as this April. That came after rates on the line of credit declined to an 18-month low in January and followed that by falling to multiple, two-year lows in February and March, making it one of the very cheapest ways to borrow money in today's economy.
But does that mean a home equity loan, often considered the HELOC counterpart for the similar way it functions, is no longer worth opening? Home equity loans, after all, were one of the cheaper and more reliable borrowing products for much of the last few years, even when inflation was high and interest rates were elevated. As HELOC interest rates continually fall, however, is a home equity loan still worth it for homeowners? You may be surprised to learn that it can still be. Below, we'll explain why.
Start by seeing what home equity loan interest rate you'd currently qualify for here.
Why a home equity loan is still worth it (even as HELOC rates fall)
Here are three strong reasons why a home equity loan can still be worth opening now, even with HELOC interest rates on the decline:
Home equity loan rates have also declined
Sure, HELOC interest rates may have dropped by a bigger amount in a shorter time, but home equity loan rates have also been declining for more than a year. They sat at around 9.08% in early January 2024 and are averaging 8.37% as of April 1, 2025. That's around 70 basis points lower than they were. And while still higher than HELOCs, the difference may be negligible if you're looking to pay off your home equity loan funds quickly. Additionally, the same factors that drive HELOC rates downward are likely to continue to cause home equity loan rates to fall, making now an opportune time to shop around for rates and terms.
Start shopping for a low-rate home equity loan now.
Home equity loan rates are fixed
Remember that HELOC interest rates, which change monthly for borrowers, can rise as easily as they can fall. So while it can be advantageous to have the line of credit now, when interest rates are consistently cooling, this isn't likely to be the long-term dynamic, especially considering the common 10- or 15-year HELOC repayment periods.
Home equity loans, however, have comparable rates to HELOCs now, and, more importantly, that rate is fixed and will remain the same unless the homeowner elects to refinance at a later point. This will allow for precise budgeting both now and over the full life of the loan, which is difficult to do with a HELOC that may have a low rate now but that could change at any point.
The tax benefits are the same
Right now, the major advantage of a HELOC when compared to a home equity loan is the lower rate. And that's not an insignificant difference. Still, home equity loans tend to be more reliable thanks to that fixed interest rate. And they also have the same tax benefits that HELOCs do, namely that the funds may be eligible for a tax deduction if used for eligible home repairs and renovations.
This is important to remember when trying to determine which of the two home equity borrowing products is more valuable now. With a more optimal rate structure and identical tax advantages, the lower HELOC rate becomes the singular advantage when compared to home equity loans. So consider it as part of a wider analysis.
The bottom line
A HELOC's low rate is a major consideration now. But currently, lower HELOC interest rates haven't diminished the value of a home equity loan, either. With a comparable, albeit slightly higher rate, but a rate that's fixed in the face of economic uncertainty, a home equity loan can still be worth opening now. And the tax benefits a HELOC offers are the same ones a home equity loan does. In short, both home equity borrowing products have unique features right now, so it's worth exploring both to determine which is more beneficial for your financial situation both now and into the future.
Compare your current HELOC and home equity loan options here now.
