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Why you should get a home equity loan before May

Taking advantage of a home equity loan before May could be a wise choice.  Getty Images/iStockphoto

Have you thought about tapping into your home equity? Doing so could give you access to funding with a competitive interest rate that you can use to cover an unlimited number of potential expenses

One way to tap into your home equity is by using a home equity loan. These loans offer lump-sum financing with fixed interest rates and monthly payments. And, since the average homeowner in the United States has around $299,000 in equity (and can safely use $193,000 of it), you may have enough available equity to cover any pressing expense you have.

But, if you think you'll need that funding in the near term, it may be wise to tap into your equity before the start of May. Waiting too long to access your home equity could be a mistake. Below, we'll break down why.

Find out how affordable your home equity loan could be now

Why you should get a home equity loan before May

Here are three reasons you should get a home equity loan before May: 

Continued inflation could mean higher rates are ahead

Today's high interest rates are the result of multiple Federal Reserve rate hikes in response to high inflation following the COVID-19 pandemic. While those rate hikes have tampered inflation a bit, the inflation rate is still too high for comfort - and that rate has begun to head up again thus far in 2024

The Federal Reserve will be meeting to discuss monetary policy from April 30, 2024 through May 1, 2024. If the central bank alludes to any potential rate hikes ahead, or a further delay in rate cuts, home equity loan interest rates could rise. So, it may be wise to lock in your home equity loan interest rate before that happens.

Lock in your home equity loan rate now before rates have a chance to climb

Rates on home equity loans are still lower than other options

If you need access to funding, and you're considering credit as a way to get the funding you need, home equity loans are a compelling option. That's because they typically come with lower interest rates than other popular options.

While the average credit card interest rate is over 20% and the average personal loan interest rate is over 12%, the average 10-year home equity loan interest rate is just 8.77%. And, the average interest rate on a 15-year home equity loan is slightly lower at 8.76%. That's even lower than some other home equity borrowing options. For example, the average home equity line of credit (HELOC) interest rate is currently 9.07%, more than a quarter point higher than either home equity loan option.

Fixed rates make it easier to budget for payments in today's inflationary environment

Home equity loans typically come with fixed interest rates, which result in fixed monthly payments. That's a significant advantage when compared to borrowing options with variable interest and payments, like credit cards and HELOCs. 

In today's economic environment, one in which prices for consumer goods and services are rising, it's easier to budget for fixed monthly payments than it would be to budget for payments that could rise ahead - like those associated with credit cards and HELOCs. 

Take advantage of a fixed-rate home equity loan today

The bottom line

In today's climate, there are a multitude of reasons why you may need access to funding. And if you own your home, a home equity loan could give you a way to tap into the funding you need with competitive interest rates. 

But it's important to act quickly. As stubborn inflation continues, interest rates may head up in the future. That's especially the case as we near the next Fed meeting. By tapping into your home equity with a home equity loan before May, you can rest assured that your loan won't be subject to potentially higher rates following that Fed meeting. 

Home equity loans offer another key benefit, too. With fixed interest and payments, the payments on these loans are relatively easy to budget for when compared to variable rate lending options. 

Find out how affordable a home equity loan can be now

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