A home equity loan lets you borrow a lump sum against your home’s equity at a fixed interest rate with predictable monthly payments. Unlike a HELOC’s variable rate, you know exactly what you’ll pay every month for the life of the loan — making it ideal for large, one-time expenses like a major home renovation, debt consolidation, or a big purchase.
This guide breaks down how to find the best home equity loan, what it costs, and when it’s the right (or wrong) choice.
Home Equity Loan Basics
| Feature | Details |
|---|---|
| Rate type | Fixed |
| Disbursement | Lump sum at closing |
| Typical rate range (2026) | 7.5–10.5% |
| Loan terms | 5, 10, 15, 20, or 30 years |
| Minimum loan amount | $10,000–$25,000 (varies by lender) |
| Maximum loan amount | Up to 80–85% CLTV |
| Closing costs | 2–5% of loan amount |
| Payments | Fixed monthly P&I from day one |
| Collateral | Your home (second lien) |
| Tax deductible | Only if used for home improvements |
For current home equity loan rates, see our home equity loan rates page.
Home Equity Loan Rates by Credit Score
Your credit score has the biggest impact on the rate you’ll receive. Here’s how rates typically break down.
| Credit Score | Typical Rate Range | Monthly Payment on $75K, 15-Year | Total Interest Paid |
|---|---|---|---|
| 740+ | 7.50–8.50% | $696–$738 | $50,200–$57,800 |
| 700–739 | 8.25–9.25% | $729–$773 | $56,100–$64,200 |
| 680–699 | 9.00–10.00% | $761–$807 | $62,000–$70,300 |
| 660–679 | 9.75–10.75% | $794–$841 | $68,000–$76,500 |
| 620–659 | 10.50–11.50% | $828–$876 | $74,100–$82,600 |
Even 40 points matters: Moving from 680 to 720 credit score on a $75,000 home equity loan could save $6,000–$12,000 in total interest.
Home Equity Loan vs. Other Options
| Feature | Home Equity Loan | HELOC | Cash-Out Refinance | Personal Loan |
|---|---|---|---|---|
| Rate type | Fixed | Variable | Fixed | Fixed |
| Typical rate | 7.5–10.5% | 7.0–10.0% | 6.5–7.5% | 8–15% |
| Closing costs | 2–5% | 0–2% | 2–6% | 0–5% |
| Disbursement | Lump sum | Draw as needed | Lump sum | Lump sum |
| Replaces first mortgage | No | No | Yes | No |
| Uses home as collateral | Yes | Yes | Yes | No |
| Maximum loan amount | Up to 85% CLTV | Up to 85% CLTV | Up to 80% LTV | $50K–$100K typically |
| Best for | Large one-time expense, want fixed payments | Ongoing expenses, flexibility | Large amount, want lowest rate | Smaller amount, don’t want to risk home |
For a detailed comparison, see our home equity loan vs HELOC guide.
What Home Equity Loan Lenders Charge
| Fee | Typical Range | Best-in-Class | Notes |
|---|---|---|---|
| Interest rate | 7.5–10.5% | Below 8% (740+ credit) | Fixed for life of loan |
| Origination fee | 0–1.5% | 0% | Negotiable — ask for waiver |
| Appraisal | $300–$700 | AVM (no cost) | Some lenders use automated valuations |
| Title search | $100–$400 | Included | Required for second lien |
| Recording fee | $25–$250 | Varies by county | Government fee |
| Application fee | $0–$75 | $0 | Walk away from high app fees |
| Total closing costs | $1,500–$5,000 | Under $1,000 | On a $75,000 loan |
Sample Cost Comparison: $75,000 Home Equity Loan
| Lender Type | Rate | Monthly Payment (15yr) | Total Closing Costs | Total Cost Over Life |
|---|---|---|---|---|
| Credit union | 7.75% | $707 | $800 | $128,060 |
| Online lender | 8.25% | $729 | $500 | $131,720 |
| Big bank | 8.75% | $752 | $1,500 | $136,860 |
| Community bank | 8.50% | $740 | $1,200 | $134,400 |
Difference between best and worst: $8,800 over the life of the loan. This is why shopping matters.
What Makes a Good Home Equity Loan Lender
| Quality | Why It Matters | What to Ask |
|---|---|---|
| Competitive fixed rates | Determines your total cost | “What rate would I qualify for?” |
| Low closing costs | Some lenders waive most fees | “What are total closing costs? Can any be waived?” |
| Flexible terms | 5, 10, 15, 20, 30 year options | “What loan terms do you offer?” |
| Low minimum loan | Some lenders require $25K+ minimum | “What’s your minimum home equity loan amount?” |
| Fast processing | Home equity loans can take 2–6 weeks | “What’s your average time to close?” |
| No prepayment penalty | Freedom to pay off early or refinance | “Is there a prepayment penalty?” |
| High CLTV limit | 85% CLTV = more borrowing power | “What’s your maximum combined LTV?” |
| Rate lock available | Lock your rate while processing | “Can I lock my rate at application?” |
How Much Can You Borrow?
| Home Value | Current Mortgage | Available at 80% CLTV | Available at 85% CLTV |
|---|---|---|---|
| $350,000 | $200,000 | $80,000 | $97,500 |
| $400,000 | $250,000 | $70,000 | $90,000 |
| $500,000 | $300,000 | $100,000 | $125,000 |
| $600,000 | $350,000 | $130,000 | $160,000 |
| $750,000 | $400,000 | $200,000 | $237,500 |
| $500,000 | $150,000 | $250,000 | $275,000 |
Use our home equity calculator for your specific numbers.
Best Uses for a Home Equity Loan
| Use | Makes Sense? | Why |
|---|---|---|
| Home renovation (adds value) | ✅ Yes | Tax-deductible interest, increases property value, lowers effective cost |
| Debt consolidation (high-rate) | ✅ Usually | 8.5% home equity rate vs 22% credit cards = major savings |
| Emergency (large medical bill) | ✅ If needed | Low rate vs. alternatives, but only if you can maintain payments |
| Education expenses | ⚠️ Maybe | Compare to federal student loan rates and terms first |
| Vacation or wedding | ❌ No | Don’t put your home at risk for discretionary spending |
| Investing / stock market | ❌ No | Too risky — you could lose both the investment and your home |
| Down payment on another home | ⚠️ Caution | Creates significant leverage risk if home values drop |
Debt Consolidation Example
| Debt | Balance | APR | Min. Payment | Monthly Interest |
|---|---|---|---|---|
| Credit card 1 | $15,000 | 24.99% | $450 | $312 |
| Credit card 2 | $8,000 | 21.49% | $240 | $143 |
| Personal loan | $12,000 | 14.99% | $280 | $150 |
| Total before | $35,000 | ~20% | $970 | $605 |
| Home equity loan | $35,000 | 8.50% | $346 (15yr) | $248 |
| Monthly savings | $624 | $357 | ||
| Interest savings (if paid in 5 years) | ~$21,000 |
Caution: This only works if you stop using the credit cards. Consolidating and then running up new debt is the most common debt trap.
Home Equity Loan Process Timeline
| Step | Timeframe | What Happens |
|---|---|---|
| Application | Day 1 | Submit application, provide income/asset docs |
| Appraisal ordered | Days 3–7 | Lender orders appraisal or AVM |
| Appraisal completed | Days 7–14 | Appraiser inspects property |
| Underwriting | Days 7–21 | Lender reviews all documentation |
| Conditional approval | Days 14–28 | Lender may request additional documents |
| Clear to close | Days 21–35 | All conditions met |
| Closing | Days 30–45 | Sign documents, receive funds |
| Right of rescission | 3 business days after closing | You can cancel within this window |
| Funds available | 3 days after closing | After rescission period ends |
Important: The 3-day right of rescission applies to home equity loans (not purchase mortgages). You can cancel for any reason within 3 business days of closing with no penalty.
Choosing the Right Loan Term
| Term | Monthly Payment ($75K at 8.5%) | Total Interest | Best For |
|---|---|---|---|
| 5 years | $1,538 | $17,260 | Maximize savings, can handle high payment |
| 10 years | $930 | $36,600 | Balance between payment and total cost |
| 15 years | $738 | $57,840 | Most common — reasonable payment, manageable cost |
| 20 years | $651 | $81,240 | Lower payment but significantly more interest |
| 30 years | $577 | $132,660 | Lowest payment but massive total interest cost |
Rule of thumb: Choose the shortest term you can comfortably afford. The difference between a 10-year and 20-year term on $75,000 is $44,640 in interest.
The Bottom Line
Home equity loans offer the lowest fixed-rate option for large, one-time expenses. Their predictable payments and fixed rates make them ideal when you know exactly how much you need and want certainty in your budget. The key is shopping at least 3 lenders, prioritizing credit unions and online lenders for the best rates, and choosing the shortest term you can afford.
Never use a home equity loan for discretionary spending — your home is the collateral. But for home improvements, high-rate debt consolidation, or major necessary expenses, the rate savings compared to credit cards or personal loans can be significant.
Related resources:
- Home Equity Loan Rates — Current rates
- Home Equity Loan vs HELOC — Which is right for you
- Home Equity Calculator
- Best HELOC Lenders
- Best Mortgage Lenders
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