A home equity loan gives you a lump sum upfront at a fixed interest rate, currently averaging 7.35% nationally, and you pay it back in equal monthly installments for a set number of years. A HELOC (home equity line of credit) works more like a credit card secured by your house: you get a credit limit, you draw against it only when you need money, and you pay a variable rate that's currently averaging 7.26%. The rates are close enough right now that the bigger difference isn't cost, it's structure. If you know exactly how much you need and want a payment that never changes, a home equity loan fits better. If you need flexibility to borrow in pieces over time, a HELOC fits better, at the cost of a payment that can move with interest rates.
What Is a Home Equity Loan, Exactly?
A home equity loan is a second mortgage. You borrow a fixed lump sum against the equity in your home, secured by the house itself, and repay it in fixed monthly payments over a set term, typically 5 to 30 years, at a fixed interest rate that doesn't change for the life of the loan. Because the rate and payment are locked in on day one, a home equity loan behaves exactly like the mortgage you already have: predictable, and easy to budget around. The trade-off is that you get the entire amount at once, whether you need all of it immediately or not, and you start paying interest on the full balance from day one.
What Is a HELOC, Exactly?
A HELOC is a revolving line of credit secured by your home, similar in structure to a credit card but with your house as collateral instead of no collateral at all. It has two phases: a draw period, usually 10 years, during which you can borrow, repay, and borrow again up to your credit limit, often paying interest-only during that stretch, followed by a repayment period, usually 20 years, when you can no longer draw and must pay down both principal and interest. The rate is variable, tied to an index like the prime rate, so your payment can rise or fall over the life of the loan, including a real jump when the draw period ends and principal payments kick in for the first time.
Which One Has the Lower Rate Right Now?
HELOCs are slightly cheaper right now: the national average HELOC rate is 7.26% as of Bankrate's September 9, 2026 survey of major home equity lenders, versus 7.35% for a fixed-rate home equity loan, per Curinos data reported the same week. That's a gap of only about 9 basis points, small enough that it shouldn't be the deciding factor on its own. What matters more is that the home equity loan's 7.35% is locked in for the full term, while the HELOC's 7.26% is a snapshot that can move in either direction. A HELOC that's cheaper today can easily become the more expensive option a few years into repayment if rates rise, which is the real trade-off underneath that small starting gap.
How Do the Real Numbers Compare on a $50,000 Loan?
Borrow $50,000 and repay it over 15 years, and a fixed-rate home equity loan at 7.35% costs $459.25 a month and $32,665.80 in total interest over the life of the loan. A HELOC repaid on the same schedule, at today's 7.26% average rate held flat for comparison, costs $456.71 a month and $32,208.40 in total interest, a difference of only $457.40 over 15 years if the rate never moved. That's the entire catch: a HELOC's rate doesn't hold flat by design. If the index it's tied to rises even 1 percentage point at some point during those 15 years, the HELOC's total interest cost can overtake the home equity loan's fixed cost easily, and there's no way to know in advance which way rates will move over a 15-year stretch.
Is HELOC or Home Equity Loan Interest Tax-Deductible?
Only if you use the money to buy, build, or substantially improve the home that secures the loan, and only if you itemize deductions instead of taking the standard deduction. Under current rules, interest on a home equity loan or HELOC used to remodel a kitchen or add a room can be deductible, subject to an overall combined mortgage-debt cap of $750,000 for married couples filing jointly. Interest on the same loan used to pay off credit card debt, cover tuition, or fund a vacation is not deductible, regardless of how the lender labels the product. If you use a HELOC for a mix of home improvements and other spending, only the improvement portion of the interest qualifies, and the IRS puts the burden on you to document which dollars went where.
Which One Should You Actually Use for Debt Consolidation?
Be honest with yourself about what you're actually trading before you use either one to pay off credit cards. Moving $20,000 of credit card debt at 24% APR into a home equity loan or HELOC at around 7% is a real, large interest savings on paper. But you're converting unsecured debt, where the worst case is a damaged credit score, into debt secured by your house, where the worst case is foreclosure if you can't keep up with payments. That trade only makes sense if you've also fixed whatever caused the credit card balance to build up in the first place. If you haven't, the common outcome is running the cards back up while still owing the home equity debt on top, which is strictly worse than where you started. Before putting your house on the line, run the actual numbers on paying the cards down directly with our debt payoff calculator, and see our breakdown of debt snowball vs. debt avalanche for a comparison that doesn't require using your home as collateral at all.
What Are the Real Risks of Borrowing Against Your Home?
- Foreclosure is a real possibility, not boilerplate fine print. Both products are secured by your house. Miss enough payments and the lender can foreclose, the same as with your primary mortgage.
- A HELOC's payment can jump hard when the draw period ends. Years of interest-only payments can end with a repayment period that suddenly includes principal, sometimes doubling or tripling the monthly payment overnight.
- You're spending down your equity cushion. Less equity means less room to sell without bringing cash to closing, and less room to refinance if your circumstances change.
- HELOCs often carry fees a home equity loan doesn't. Annual fees, early-closure fees, and inactivity fees are common on lines of credit and worth reading the fine print for before you sign.
- Rate risk is real, not theoretical. A HELOC's variable rate has moved more than 2 percentage points in either direction within a single multi-year stretch before, and your payment moves with it whether you planned for that or not.
So Which One Actually Fits Your Situation?
- You know the exact amount and want it once. A single kitchen remodel with a fixed contractor quote is a home equity loan situation: borrow the number you need, lock the rate, and know the payment on day one.
- You need money in pieces over an uncertain timeline. A multi-phase renovation, ongoing medical costs, or a cash cushion you hope not to fully use is a HELOC situation, where you only pay interest on what you actually draw.
- You can't stomach a payment that moves. If a rate increase down the road would genuinely strain your budget, the fixed payment of a home equity loan is worth more than the HELOC's small rate edge today.
- You're using either one to cover recurring expenses or pay off debt you might re-accumulate. That's the scenario where the risk of putting your home on the line stops making sense, no matter which product you'd otherwise pick.
If you're weighing a home equity loan or HELOC against paying down your primary mortgage instead, our breakdown of paying off your mortgage early vs. investing the extra money runs the same kind of real math on that decision. And if you're still working out what you can responsibly afford to borrow against your home in the first place, how much house you can actually afford using the 28/36 rule is the right starting point.
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Spicy Investing