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Home Equity Line of Credit vs Loan: What’s Better Now?
Home Equity Line of Credit vs Loan: What’s Better Now?
We needed cash for a major renovation. The options? A fixed home equity loan or a home equity line of credit (HELOC). We compared both, ran the numbers, and chose what actually worked for our finances in 2025.
What’s the Difference?
- Home Equity Loan: Fixed lump sum, fixed interest, predictable monthly payment
- HELOC: Revolving credit line, variable rate, flexibility on usage and draw
2025 Home Equity Line of Credit Rates
HELOC rates this year are hovering around 8.25% variable APR, while fixed rate home equity loans start near 7.49% APR depending on credit and LTV. Not a huge spread — but a big difference in predictability.
Why We Chose a HELOC
We didn’t need all the money up front. Our project was phased — and we wanted flexibility. HELOC let us draw as needed and avoid interest on unused funds. Just note: variable vs fixed home equity line decisions matter more if rates rise.
When a Home Equity Loan Is Better
If you know your cost upfront and prefer a fixed monthly payment, the loan may be safer. This is especially true if you’re not good with fluctuating bills or market risk.
How to Qualify for Either
- ✔ At least 15–20% equity in your home
- ✔ Credit score above 620 (680+ preferred)
- ✔ Proof of income (W2, 1099, or business tax returns)
- ✔ Current home equity loan rates eligibility depends on LTV and DTI
HELOC vs Home Equity Loan: Pros and Cons
| Feature | HELOC | Home Equity Loan |
|---|---|---|
| Rate Type | Variable | Fixed |
| Funding | As Needed (draw period) | Lump Sum |
| Flexibility | High | Low |
| Repayment Term | 10–25 Years | 5–20 Years |
| Good For | Ongoing projects, flexible use | One-time big purchase or debt payoff |
Final Thoughts
We ended up using a HELOC — but I’ve had friends who swear by a loan. What matters most is how you plan to use the funds. For best HELOC rates 2025, compare now and move quickly — because rates are still shifting monthly.
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Labels: home equity line of credit rates, HELOC vs loan 2025, fixed home equity loan, best heloc rates, compare equity options
Search Description: Trying to decide between a home equity loan or HELOC? Here’s how we compared rates, risk, and flexibility — and what we picked in 2025.
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