3 safety features home equity loans offer borrowers now
If you're looking to borrow money for 2025 and already own a home that's appreciated, then your home equity may be your optimal borrowing option right now. With a home equity loan or home equity line of credit (HELOC), you can potentially access hundreds of thousands of dollars worth of equity at an interest rate significantly lower than some popular alternatives.
But while both products operate in similar ways, some distinct differences could prove costly, if not understood properly. When stacked against each other, the safety features inherent in a home equity loan, specifically, are seen more clearly. Before getting started, it helps borrowers to understand these three safety features, particularly in the developing economic climate of 2025. Below, we'll break down what to know now.
Start by seeing how much equity you could borrow with a home equity loan here.
3 safety features home equity loans offer borrowers now
While the following home equity loan features are generally consistent, no matter the economic climate, they're particularly pronounced right now. Specifically, if a borrower pursues a home equity loan this month they can generally expect to obtain all of the following safety features:
A lower interest rate than many alternatives
The average credit card interest rate is approximately 23% now while the median personal loan rate is better but still high at around 12%. The average home equity loan rate, by comparison, is just 8.41%. So if you need to borrow money now and want to limit your expenses when doing so, arguably the safest way to do so is with a home equity loan. That said, your home does function as collateral in these borrowing exchanges, so it's critical that you only withdraw an amount that you can easily afford to repay. But with an interest rate under 9% for qualified borrowers, that may not be much of a concern.
See what home equity loan interest rate you could secure online now.
A fixed interest rate that can be relied on
A fixed interest rate on a borrowing product is a safety feature that can't be oversold. If you need to borrow money, you'll want to know exactly how your repayments will be structured to best determine your ability to repay. Variable rate products, like HELOCs, however, don't allow for that accurate budgeting. Instead, interest rates on HELOCs will change monthly, perhaps by a significant degree, thus adding risk and uncertainty when you need it least. But home equity loans don't come with that stress as you'll know exactly what your payments will be each month. And, if interest rates ultimately drop in the future, you can simply refinance your home equity loan to a new, lower fixed rate then.
Tax benefits that alternatives don't provide
While not necessarily a traditional safety feature, it can be reassuring for prospective home equity loan borrowers to know that they'll qualify for tax benefits if they use the loan for eligible home repairs and projects. If utilized for these reasons, the interest paid on the loan can potentially become tax-deductible, both reducing your tax bill each spring and the stress over today's interest rates. After all, if the interest paid is deductible, the monthly payment becomes less of a concern. Still, HELOCs come with this same feature so it's important to weigh each carefully to determine if a home equity loan is truly the more advantageous option when viewed through this prism.
The bottom line
A home equity loan comes with these unique safety features, which can be especially helpful in today's economy, but it also comes with inherent risks that will need to be carefully considered as well. By understanding both, homeowners can better position themselves for borrowing success in today's economy and in the changing one ahead.
Have more questions? Learn more about your home equity loan options here.
