Home equity loan vs. HELOC: What’s the difference?

While a home equity loan and a HELOC can be used to cover the same expenses, they work differently: Home equity loan: You’ll receive a lump sum and have both a fixed rate and set monthly payments for the duration of the loan. Home equity loans also typically come with higher rates than HELOCs. HELOC: This is a line of credit that works similarly to a credit card. You take out what you need from the total amount and are only responsible for paying back what you use, and you have the option of borrowing again. This could be a better choice if you’re not sure exactly how much you need to borrow or have recurring expenses. Also, HELOCs typically have lower rates than home equity loans. However, these rates are variable, meaning they can fluctuate over time.

Best home equity loan interest rates of August 2023

Jamie Young

BLUEPRINT

Published 1:59 a.m. ET Aug. 1, 2023

Editorial Note: Blueprint may earn a commission from affiliate partner links featured here on our site. This commission does not influence our editors' opinions or evaluations. Please view our full advertiser disclosure policy.

If you need to make renovations to your home, consolidate debt or cover another major cost, a home equity loan could be the solution. Home equity loans allow you to borrow money by using your home’s equity—the value of your property minus your existing mortgage balance—as collateral.

We’ve ranked multiple lenders to help you find the best home equity loan rate. While these rankings mainly focused on each home equity loan lender’s minimum annual percentage rate (APR), we also considered the ease of the application process, fees and discounts, combined loan-to-value (CLTV) ratio, transparency in borrowing requirements and overall customer service.

Old National Bank
: Best overall
TD Bank
: Best for variety of loan terms
Navy Federal Credit Union
: Best for high CLTV
Fifth Third Bank
: Best for no closing costs:
BMO Harris
: Best for rate discount
Flagstar
: Best for large loans
Connexus Credit Union
: Best for fair credit
Compare the best home equity loan rates
Why some lenders didn’t make the cut
Methodology
How to calculate your home equity
Home equity loan alternatives
Frequently asked questions (FAQs)

Best home equity loan rates

Blueprint Rating

What you should know

Old National Bank has more than 250 locations in the Midwestern U.S. and offers several personal banking products, including deposit accounts, credit cards and loans. Its home equity loans are worth considering if you’re looking for a quick loan closing.

Certain lenders take 60 days or more to close new home equity loans, meaning borrowers may wait on loan funds for months. Old National Bank indicates that it can close loans in less than 30 days, making it a convenient option if you need funds quickly.

Pros and cons

Pros

Lower minimum interest rate than competitors.
Fast closings available.
Can apply in person or online.
Accessible customer service.

Cons

Credit score requirements not disclosed.
Branches only available in seven states.

More details

Interest rates: Below the national average.
Discounts and perks: Does not disclose.
Minimum credit score: Does not disclose.
Max CLTV ratio accepted: 89%.
Closing times: Under 30 days.

Blueprint Rating

What you should know

TD Bank is an established lender providing banking services to nearly 20 million customers in North America. Its home equity loans offer competitive rates, flexible terms and a transparent lending process. All of these features combined make TD Bank our best overall pick for borrowers seeking a home equity loan.

In particular, this lender’s transparency makes it stand out from competitors. While some lenders offer limited details about the lending process, TD Bank isn’t one of them. It provides a wealth of information to help potential borrowers understand its products, timeframes, rates and terms. Borrowers who choose this lender can feel confident they’re making an informed decision.

Pros and cons

Pros

Lower minimum interest rate than competitors.
Repayment terms of 5 to 30 years.
Online and in-person customer service available.
Autopay discount available.

Cons

Closing time is longer than some competitors.
Lower CLTV ratio than some competitors.

More details

Interest rates: Below the national average.
Discounts and perks: Fixed interest rate and a 0.25% rate discount for autopay.
Minimum credit score: 660.
Max CLTV ratio accepted: 89.99%.
Closing times: 30 to 45 days.

Blueprint Rating

What you should know

While you’ll need to be an active-duty service member, veteran, or qualifying spouse to become a member at Navy Federal Credit Union, this lender offers certain perks for borrowers. Those seeking a home equity loan can access flexible terms of 5, 10, 15 or 20 years.

Many lenders only let you borrow around 80 to 85% of your total equity, but you can borrow up to 100% of your total equity with Navy Federal if you qualify for membership.

Pros and cons

Pros

Lower minimum interest rate than competitors.
Maximum CLTV ratio is 100%.
Flexible terms offered.

Cons

Strict membership requirements.
Longer closing times than most competitors.

More details

Interest rates: Below the national average.
Discounts and perks: Senior military members can access special offers through Navy Federal’s Senior Enlisted Reward Program, including a $250 loyalty card when they get a home equity loan. Membership referral bonuses are also available.
Minimum credit score: Does not disclose.
Max CLTV ratio accepted: 100%.
Closing times: 40 to 55 days.

Blueprint Rating

What you should know

Fifth Third Bank has over 1,100 banking locations in 11 U.S. states. Fifth Third offers several banking and lending products, including home equity loans with competitive rates and other perks.

While other lenders on our list advertise low closing costs, Fifth Third doesn’t charge any closing costs for its home equity loans.

Pros and cons

Pros

Lower minimum interest rate than competitors.
No closing costs.
Fairly low minimum credit score requirement.
Option to apply online or in person.

Cons

Only offers home equity loans in 11 states.
Website doesn’t disclose much information about its home equity loan.

More details

Interest rates: Below the national average.
Discounts and perks: A rate discount of 0.25% when you use an eligible Fifth Third account for autopay.
Min. credit score requirements: 660.
Max CLTV ratio accepted: 89%.
Closing times: 30 to 45 days.

Blueprint Rating

What you should know

BMO Harris provides banking services to over 12 million customers in North America. It offers a wide selection of banking products, including checking and savings accounts, CDs, credit cards and loans.
BMO Harris’s home equity loans come with flexible terms of 5, 10, 15 or 20 years. Borrowers can benefit from a significant autopay discount of 0.50% when they use a BMO checking account to repay their loan.

Pros and cons

Pros

Can apply in person or online.
Generous autopay discount (0.50%) available.
Can borrow up to 89% of your home’s equity.
Loan terms of 5 to 20 years are available.

Cons

Higher minimum interest rate than competitors.
Only offers online rate quotes for certain states.
High minimum credit score requirement.

More details

Interest rates: Above the national average.
Discounts and perks: A rate discount of 0.50% when you use a BMO checking account for autopay.
Minimum credit score: 700.
Max CLTV ratio accepted: 89%.
Closing times: 30 to 45 days.

Blueprint Rating

What you should know

Flagstar is one of the biggest mortgage originators in the U.S. In addition to mortgages, it also offers an array of banking and lending products, including home equity loans.

Flagstar will lend up to $1 million to qualified borrowers. Those with high-value homes and significant equity may appreciate the option to tap into up to $1 million worth of home equity to renovate, consolidate debt or cover another large cost.

Pros and cons

Pros

Large loans available.
Autopay discount available.
Offers online and in-person service.

Cons

Higher minimum interest rate than competitors.
Doesn’t offer home equity loans in all states.

More details

Interest rates: Below the national average.
Discounts and perks: A rate discount of 0.25% when you use a Flagstar account for autopay.
Minimum credit score: 680.
Max CLTV ratio accepted: 89%.
Closing times: 30 to 45 days.

Blueprint Rating

What you should know

Connexus Credit Union provides banking products and services to members in 50 states, offering several loan products, including home equity loans. Its credit score requirements are less strict than some competitors.

Connexus’s minimum credit score requirement is just 640. Borrowers concerned their fair credit could be a barrier to loan approval may want to put Connexus on their shortlist.

Pros and cons

Pros

Fair-credit borrowers could qualify.
Can borrow up to 90% of home equity.
Quick closings available.

Cons

Higher minimum interest rate than competitors.
Connexus credit union membership is required.
Doesn’t offer home equity loans in Maryland, Texas, Hawaii, and Alaska.

More details

Interest rates: Above the national average.
Discounts and perks: Does not disclose.
Min. credit score requirements: 640.
Max CLTV ratio accepted: 90%.
Closing times: Under 30 days.

Compare the best home equity loan rates

	APR	Min. credit score	Max CLTV ratio	Closing time
Old National Bank	Below national average	Does not disclose	89%	Less than 30 days
TD Bank	Below national average	660	89.99%	30 to 45 days
Navy Federal Credit Union	Below national average	Does not disclose	100%	40 to 55 days
Fifth Third Bank	Below national average	660	89%	30 to 45 days
BMO Harris	Above national average	700	89%	30 to 45 days
Flagstar	Below national average	680	89%	30 to 45 days
Connexus Credit Union	Above national average	640	90%	Less than 30 days

Why some lenders didn’t make the cut

Of all the home equity loan lenders that we reviewed, only a fraction made the cut. The lenders that didn’t have high enough scores to be included received lower ratings mostly due to having higher interest rates as well as a lack of transparency around eligibility details like minimum credit score.

Methodology

Our expert writers and editors have reviewed and researched popular lenders to help you find the best home equity loan. Out of all the lenders considered, the seven that made our list excelled in areas across the following categories (with weightings): loan cost (35%), eligibility and accessibility (35%), customer service (15%) and ease of application (10%).

Within each major category, we considered several characteristics, including minimum APR, maximum CLTV ratio and minimum credit score requirements. We also evaluated each provider’s customer support options, lender discounts and features that simplify the borrowing process—like time to close.

How to calculate your home equity

The equity you have in your home is the appraised value of your home minus the amount you still owe on your mortgage.

Your Home’s Value – Total Amount Owed = Home Equity

For example, if you took out a mortgage for $600,000 and still owe $360,000, you would have $240,000, or 40%, in home equity. But keep in mind that, as a general rule, most lenders usually only let you borrow up to 85% of your CLTV ratio—the difference between your home’s value and any loans secured by your property (like your mortgage).

Home equity loan alternatives

A home equity line of credit (HELOC), cash-out refinance or personal loan might be a good alternative to a home equity loan, depending on your situation.

HELOC

A HELOC lets you draw money as you need it for a period of time (typically 10 years), and you’re only responsible for paying back what you use—similar to how credit cards work. If you’re not sure exactly how much you need to cover your extra expenses or you have recurring costs, this might be a better option.

Cash-out refinance

This type of mortgage refinance pays off your current mortgage and replaces it with a new one, leaving you with the difference as a lump sum on top of what you owe. You can use this additional amount to pay for anything you need. If mortgage refinancing rates are lower than a home equity loan or HELOC, this is likely the solution for you.

Personal loan

You can take out a personal loan to pay for almost any emergency expense or cost, which would come with a fixed rate and set monthly payment. If you only need to borrow a small amount, this might be the better choice. Additionally, unlike a home equity loan or other type of mortgage, most personal loans are unsecured—meaning you don’t have to use your house as collateral.

Just keep in mind some personal loan lenders have restrictions on what you can and can’t use their loans for.

Frequently asked questions (FAQs)

As of May 4, the average interest rate on a home equity loan is 8.15%. However, keep in mind that the rate you’ll receive will depend on the home equity loan lender you choose and a variety of other factors, including your credit score, income and more.

Home equity loan rates are usually higher than mortgage rates because they’re considered a second mortgage. As of May 4, the average interest rate on a fixed, 30-year mortgage purchase loan is 6.79% while the average home equity loan rate is 8.15%.

When you take out a home equity loan, you’re using your house as collateral. So if you’re unable to make payments on the loan, the lender could foreclose, and you might end up losing your home. Before you get this type of loan, make sure you have a plan in place and are able to keep up with payments.

Another potential downside of a home equity loan could be eventually owing more than your house is worth. For example, when you take out the loan, the value is determined by current home prices. If the area your house is in ends up declining rapidly in value, the loan amount won’t change. You’ll still have to pay based on the higher valuation.

While a home equity loan and a HELOC can be used to cover the same expenses, they work differently:

Home equity loan: You’ll receive a lump sum and have both a fixed rate and set monthly payments for the duration of the loan. Home equity loans also typically come with higher rates than HELOCs.
HELOC: This is a line of credit that works similarly to a credit card. You take out what you need from the total amount and are only responsible for paying back what you use, and you have the option of borrowing again. This could be a better choice if you’re not sure exactly how much you need to borrow or have recurring expenses. Also, HELOCs typically have lower rates than home equity loans. However, these rates are variable, meaning they can fluctuate over time.

Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.

Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.

Jamie Young

BLUEPRINT

Jamie Young is Lead Editor of loans and mortgages at USA TODAY Blueprint. She has been writing and editing professionally for 12 years. Previously, she worked for Forbes Advisor, Credible, LendingTree, Student Loan Hero, and GOBankingRates. Her work has also appeared on some of the best-known media outlets including Yahoo, Fox Business, Time, CBS News, AOL, MSN, and more. Jamie is passionate about finance, technology, and the Oxford comma. In her free time, she likes to game, play with her two crazy cats (Detective Snoop and his girl Friday), and try to keep up with her ever-growing plant collection.

Ashley Harrison

BLUEPRINT

Ashley is a USA TODAY Blueprint loans and mortgages deputy editor who has worked in the online finance space since 2017. She’s passionate about creating helpful content that makes complicated financial topics easy to understand. She has previously worked at Forbes Advisor, Credible, LendingTree and and Student Loan Hero. Her work has appeared on Fox Business and Yahoo. Ashley is also an artist and massive horror fan who had her short story “The Box” produced by the award-winning NoSleep Podcast. In her free time, you can find her drawing, scaring herself with spooky stories, playing video games and chasing her black cat Salem.