What is a good home equity loan interest rate?

Although incomes in the United States are generally rising, many Americans are struggling to keep up with high inflation rates. Try as you might, it can be challenging to get the income side of the equation to outweigh the expenses.

In addition to trying to manage everyday expenses like gas and groceries, those with debt can also struggle to keep up High interest rates, which is rising as the Federal Reserve tries to reduce inflation. If you carry a credit card balance, for example, it may take longer to pay off and become more expensive as interest rates rise.

Or, if you encounter unexpected expenses, such as home repair costs, you may not have the cash on hand to cover them.

If you are a homeowner facing such a challenge, one option may be to take one out Home equity loan. Especially for those who have enjoyed significant gains in their home equity based on appraised values ​​during the pandemic, taking out a home equity loan can provide the funding you’re looking for.

And home equity loans can often be more affordable than other forms of financing like credit cards or personal loans.

Still, home equity loans have their associated costs, especially in terms of interest rates. So, it can be helpful to compare rates and get a good idea of ​​costs before you apply for a home equity loan.

What is the interest rate on a good home equity loan in 2023?

If you’re used to lower mortgage rates in 2020 or 2021, for example, you may be in for a bit of a shock in 2023. Interest rates have generally risen significantly across the board.

That said, a good home equity loan interest rate is typically around 7% as of March 2023, based on different rates from different providers. That’s significantly lower than the average credit card rate of about 20%, according to CreditCards.com. Interest rates on personal loans are also high—roughly 11%, on a recent basis Federal Reserve Information

The actual home equity loan interest rate you can get depends on several factors, such as your loan term, location and credit history. If you have a high Credit scoreFor example, you’re more likely to find a rate of around 7%, while someone with a low credit score might pay around 8% or more.

So, if you’re considering a home equity loan, you might want to first evaluate your credit score and see if there’s anything you can do to improve that number. You’ll probably want to shop around to see what different lenders can offer you based on factors like your location and desired loan characteristics. You can easily check your local home equity loan options here or in the table below.

Know home equity loan benefits

In addition to lower rates compared to credit cards and personal loans, other popular home equity benefits can include:

• Potential for tax deduction: If you use your home equity loan for certain home improvements, you may be eligible to deduct the interest to save money on taxes. “Home equity loan interest and lines of credit are deductible only when the borrowed funds are used to purchase, construct, or substantially improve the taxpayer’s home that secures the loan,” explains The IRS.
• Fixed Rate: Another potential home equity loan advantage is that this type of financing usually comes with a fixed interest rate, unlike the often variable rates for things like credit cards. Home Equity Lines of Credit (HELOCs). In some ways, this can help you feel more comfortable taking out a home equity loan, because you know what your interest rate and payments will be for the life of the loan, even if the broader interest rate environment rises.

Keep in mind that despite these potential benefits, taking out a home equity loan isn’t always the best choice for everyone, and it’s not a decision to take lightly. But if you can inform yourself about the pros and cons of home equity loans, including interest rate comparisons, you can set yourself up to make a better decision.

Other information

Want to learn more about the ins and outs of home equity loans? Check out these articles to increase your home equity loan knowledge: