Is a HELOC better than a credit card in 2025?
Home equity borrowing comes with some inherent risks, the most important of which is the potential loss of the home if the borrower fails to repay all that's been withdrawn. But home equity loans and home equity lines of credit (HELOCs), when used judiciously, can also be smart and effective tools. And with the average home equity amount around $320,000 right now, they also offer homeowners a clear path toward borrowing a six-figure sum of money.
Before getting started, however, homeowners should carefully consider all of their options. That extends to comparing home equity products like HELOCs to other more traditional options like credit cards. These products operate in similar ways but, at the start of 2025, one may be the clear optimal choice for homeowners. Below, we'll explain why.
Start by seeing how much you could borrow with a HELOC here now.
Is a HELOC better than a credit card in 2025?
While every homeowner's financial circumstances differ, there's a compelling argument for choosing a HELOC over a credit card this year. Here's why:
Lower interest rates
HELOC rates plunged to an 18-month low to start 2025. Credit card interest rates, however, are hovering around a record 23%. That makes HELOCs almost three times cheaper than credit cards. And considering that HELOC repayment periods last from 10 to 15 years, it's important that you secure the lowest rate possible right now. Additionally, because HELOC rates are variable and subject to change based on market conditions, these rates could fall even lower later this year. While credit card rates are also variable, a drop there would need to be significant to be competitive with the HELOC rates that are already readily available now.
See what HELOC interest rate you could secure here.
Easier borrowing opportunities
Because your home is collateral when borrowing with a HELOC, lenders can easily determine its value and, subsequently, how much equity you have to work with. Even accounting for the 20% equity buffer most lenders prefer owners to keep in their homes, many can easily access a large, six-figure credit line right now. And while it's not impossible to do so with a credit card, it will typically be a much more arduous process. Credit card companies will be taking on more risk than home equity lenders will – and that will be reflected in everything from the application process to the rates and offers you ultimately receive for a six-figure credit line (if you're even approved).
Potential tax benefits
The interest you pay on a credit card will be much higher than what you'd pay with a HELOC – and you'll get stuck with it no matter what you ultimately used your credit line for. That's not the case with HELOCs, however. If used for select home repair projects borrowers may qualify to deduct the interest paid on the line of credit when they file their tax return for the year in which the funds were used. This makes concerns over interest rates less problematic than they would be for credit cards and it gives borrowers an additional savings opportunity they wouldn't have had by swiping a credit card.
The bottom line
2025 could be the time to turn to a HELOC instead of a credit card. With a lower interest rate, easier access to six-figure funding and potential tax benefits, the advantages of using a HELOC over a credit card are pronounced now and could remain significant in the years to come. Just be cautious with any level of home equity borrowing and make sure that repayments can be made with ease to avoid risking your homeownership status in the process.