Why a home equity loan is better than a credit card now

If you’re looking to borrow money at the start of 2025, some traditional options may not be particularly helpful. The average credit card interest rate is near a record 23% right now, translating to $23 in interest for every $100 borrowed. Rates on personal loans, meanwhile, are lower but still prohibitive. Right now, qualified borrowers would be fortunate to get a personal loan rate under 12% (the current average). Fortunately, borrowers who own homes have a viable alternative: their home equity.

Specifically, using a home equity loan in today’s economic climate makes sense for a variety of reasons, particularly when matched up against the credit cards in your wallet. Below, we’ll detail three big reasons why a home equity loan could be better to use than a credit card right now.

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Start by seeing what home equity loan interest rate you’d be eligible for here.

Why a home equity loan is better than a credit card now

Not sure if borrowing from your home is as advantageous as simply swiping your credit card? Here’s why it could be the right move now, if you use a home equity loan specifically:

A much lower interest rate

The average credit card interest rate is 22.80% according to the Federal Reserve. But the average home equity loan rate is just 8.43% as of January 13. That makes credit cards 170% more expensive than home equity loans. And if you need to borrow a six-figure sum of money, as home equity loans make accessible, that difference in rates could be all the difference between being able to comfortably afford the repayments and not. So consider calculating your potential costs by using both options. You may be surprised at how much cheaper a home equity loan actually is.

Get started with a home equity loan online now.

A rate that’s fixed

Home equity loan interest rates are fixed. So the 8.43% you lock in today will remain the same unless you decide to refinance to an even lower one. But credit card interest rates are variable and subject to change, perhaps to a volatile degree. And even if they were to fall in the year ahead, the same would be true for home equity loans. If you want to pay less, then, and avoid the volatility of a constantly changing interest rate, it’s more advantageous to pursue a home equity loan instead of a credit card right now.

Easy access to a large sum of money

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Qualifying for a large, six-figure credit card line can be difficult. But it won’t be as hard with a home equity loan as your home functions as collateral in these exchanges (thus the lower interest rate). And with the average home equity amount hovering near $320,000 right now, there’s likely plenty of money to utilize for spring home repair projects, debt consolidation or anything else you need to pay for currently. 

That said, the process of securing a home loan won’t be overnight. You’ll need to take time to shop for rates and lenders. And it could take a few months until the funds are ultimately disbursed, so if you decide that this is the best way to borrow now, it could benefit you to get the process started.

The bottom line

Due to a lower rate that’s fixed for the full repayment period, as well as easier access to a large sum of money, a home equity loan has natural advantages over a credit card right now. But the economic climate is constantly evolving and this could change over time. Understanding this dynamic, then, homeowners in need of extra financing should start exploring their home equity loan options now.

Have more home equity loan questions? Learn more here.