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Is a $10,000 home equity loan or HELOC cheaper right now?

When choosing between a home equity loan or HELOC, it's important to crunch the potential savings of each. Getty Images

It's always smart to pursue the most cost-effective borrowing option. But in today's economy, in which millions are still recovering from an elevated inflation cycle, and in which the federal funds rate has left interest rates raised across the board, it's critical to secure the cheapest option. While popular items like credit cards and personal loans come with double-digit rates right now, homeowners have an inexpensive alternative that they can easily access: their home equity.

While home equity borrowing comes in various forms, two of the most common are home equity loans and home equity lines of credit (HELOCs). Either is arguably better than using credit cards and personal loans, especially for lower amounts like $10,000. Considering that the average homeowner has hundreds of thousands of dollars in equity to access now, borrowing a $10,000 amount will make a small difference in the amount of equity accumulated. 

However, prospective borrowers need to know exactly which home equity option is cheaper when looking to borrow $10,000. And, since home equity loans and HELOCs operate in different ways, it's important to crunch the numbers in advance.

See what home equity loan rate you could lock in here now.

Is a $10,000 home equity loan or HELOC cheaper right now?

In the past, HELOCs have had lower interest rates than home equity loans. But in the current economy, in which rates change often and inflation is still problematic, the opposite is true. Home equity loans come with an average rate of 8.66% (as of May 22) while HELOCs come with an average rate of 9.17%. While close, home equity loans would be better to access $10,000 right now. Here's what each option would cost monthly, based on 10 and 15-year repayment schedules:

Home equity loans

  • 8.66% over 10 years: $124.84 with $4,981.17 in interest for a total of $14,981.17
  • 8.66% over 15 years: $99.41 with $7,894.53 in interest for a total of $17,894.53


  • 9.17% over 10 years: $127.60 with $5,311.72 in interest for a total of $15,311.72
  • 9.17% over 15 years: $102.44 with $8,439.28 in interest for a total of $18,439.28

As can be seen, if you're looking for the lowest-cost way to borrow $10,000 from your home, a home equity loan is the better way in today's rate climate. Not only will you save money each month, but you'll save thousands of dollars in interest over the life of the loan. 

Start exploring your home equity loan options online today.

Why a home equity loan may be better than a HELOC now

In addition to the aforementioned savings, a home equity loan also comes with a level of security that HELOCs simply do not. That's because home equity loan interest rates are fixed while HELOC rates are variable and subject to change as the rate environment evolves. That can be an advantage ahead of imminent rate cuts but is arguably detrimental now when interest rate cuts look delayed indefinitely. So, not only will you get a lower rate by choosing a home equity loan now, but that rate will remain the same even if the rate climate ticks up in the weeks and months to come.

The bottom line

If you need to borrow $10,000 right now, consider skipping personal loans and credit cards and proceed to utilize your home equity instead. When choosing this funding, however, it arguably makes more sense to utilize a home equity loan, thanks to its lower costs and locked-in rate. Just understand that this could change in the future; if rates start falling soon, a HELOC may be better for some borrowers. So do your research in advance and understand that your home is collateral in either borrowing situation, so you will want to ensure that the option you ultimately choose offers you the easiest way to pay back what you've deducted.

Learn more about home equity loans and HELOCs here.

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