With the average amount of home equity near a record of approximately $330,000 right now, homeowners have a large amount of money to utilize as they see fit. Whether they use those funds to pay for a wedding, a college education or to consolidate high interest credit card debt, home equity is often the smart way to do so. And it’s one of the least expensive alternatives, now that credit card interest rates are near 23% while personal loan rates are approaching 13%.

While there are multiple ways to tap into your home equity, from cash-out refinancing to reverse mortgages, two of the more attractive options right now are home equity loans and home equity lines of credit (HELOCs). Although both offer borrowers inexpensive ways to tap into their equity, they don’t operate in precisely the same way – and their interest rates aren’t identical, either. Going into November, then, when another cut to the federal funds rate is anticipated, which will be better for borrowers? That’s what we’ll break down below.

See how low of a home equity loan rate you could secure here.

Will a HELOC or home equity loan be better this November?

While the benefits of each of these home equity options depend on the individual borrower profile, there are some timely elements to account for this November. Here’s what to consider:

Why a HELOC could be better this November

If you’re a borrower determined to take advantage of the lowest interest rate possible then it makes sense to pursue a HELOC this November instead of a home equity loan – despite the latter have the slightly lower interest rate. Here’s why: HELOCs have variable interest rates that will change monthly as the overall rate climate evolves. This is a distinct advantage this November and, likely, in the months to come as interest rate cuts continue to be issued. 

So the 8.69% HELOC rate you open the line of credit with today could be lower in December, January and beyond. The 8.35% home equity loan rate, however, will need to be refinanced to secure any future rate savings. And you’ll need to pay refinancing costs to get that rate (often 1% to 5% of the total loan value). So, in short, if you want to be best positioned to capitalize on future interest rate cuts, a HELOC could be better for you this November. 

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Why a home equity loan could be better this November

If waiting for rates to be cut – and there’s no guarantee that they will or by how much – is too risky for your financial circumstances, then a home equity loan could be better this November. These loans do come with a slightly lower interest rate than HELOCs, which may seem marginal on paper but can add up to substantial savings over a 10 or 15-year repayment period. 

But they’ll also protect you against any future interest rate volatility, making your monthly payments in December and beyond easy to budget for. And if rates wind up dropping by a significant amount in the winter or spring of 2025, you could always refinance then – while still gaining access to the low interest rate funding you need this fall.

The bottom line

The choice between a HELOC or a home equity loan this November is a personal one, largely dependent on your financial situation and appetite for rate volatility. No matter which option you ultimately choose, however, be sure to only withdraw an amount of equity that you can easily afford to repay. With the average amount of home equity high now, it may be tempting to overborrow. But that would be a mistake since your home is collateral in this borrowing exchange and you could wind up losing it if unable to repay all that you’ve withdrawn.

Have more question about your home equity loan options this November? Learn more here.

In September, the Federal Reserve conducted its first rate cut in four years, reducing its benchmark rate by 50 basis points. This cut, which followed months of cooling inflation, was larger than many analysts had anticipated, and it had a quick — and positive — impact on borrowing rates across various loan types. For example, before (and shortly after) the Fed rate cut, the rates on mortgages and home equity loans dipped, providing much-needed relief to the borrowers who had been seeking out these types of loans.

Rates on these loans have been ticking back up in the time since. However, many economists predict that the Fed will continue lowering its benchmark rate in the coming months, with the next rate cut expected in November. Another Fed rate cut could help reduce certain types of borrowing costs even further, potentially benefiting those looking to finance large purchases or refinance existing loans. 

But while the Fed’s upcoming rate cut is likely to make mortgage and home equity loans more affordable, the issue is a bit more complex in terms of credit card interest rates. Contrary to what we saw with mortgage loan and home equity loan rates, the Fed’s September rate cut had little impact on card rates. So how much of an impact can we expect the November Fed rate cut to have on credit card rates? Below, we’ll detail what to know. 

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How far will credit card interest rates fall in November?

While there’s a possibility that credit card interest rates could fall this November, the reality is that it’s unlikely to occur — not due to the Fed rate cut alone, anyway. That’s because credit card interest rates are less sensitive to Fed rate cuts compared to other types of debt. Rather, they are influenced by a variety of factors beyond the federal funds rate. 

Most credit cards have variable interest rates tied to the prime rate, which moves with the federal funds rate. However, issuers have the discretion to decide when, or if, they will pass along the benefits of a lower prime rate to cardholders. As such, even if the Fed cuts its benchmark rate again in November, credit card holders might not experience immediate relief.

The average credit card interest rate is also about 23% currently, a historically high figure that has put immense pressure on consumers carrying balances. So, even if there were a 25- or 50-basis point reduction following the Fed rate cut in November, interest rates on credit cards may only drop slightly, falling to around 22% or 22.5%. And while any decrease is helpful, it likely won’t make a significant difference for those struggling with large amounts of credit card debt.

Plus, credit card issuers tend to be much faster in terms of raising rates when the Fed hikes its benchmark rate. They’re much more hesitant in terms of lowering them. This discrepancy means that while borrowing costs may fall for other types of debt relatively quickly, credit card interest rates may remain elevated for some time, even if the prime rate declines. Credit card interest rates have also been rising steadily for several years — and it’s unlikely that another Fed rate cut would reverse that trend.

Given these complexities, it is unlikely that credit card rates will see a substantial decrease in November, even if the Fed continues to lower its benchmark rate. So, if you’re feeling burdened by high credit card rates, you may want to consider alternative strategies to help manage your debt instead.

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How to lower your credit card interest rates this November

While waiting for credit card interest rates to fall may not yield immediate results, there are several strategies you can use to reduce your interest costs. One of the most effective approaches involves transferring your balance to a credit card offering a promotional 0% introductory APR (typically for 12 to 21 months). That allows you to focus on paying down the principal balance without accruing additional interest, making it easier to get ahead.

Another option to consider is debt consolidation, which involves taking out a loan with a lower interest rate to pay off multiple high-rate credit cards. By consolidating your card balances into one loan with a fixed monthly payment, you can reduce the amount of interest you’re paying and simplify your debt management. 

A debt management program could also be an effective way to reduce your credit card interest rates. These programs, which are typically offered by credit counseling agencies, involve negotiating with your creditors to lower your interest rates and create a structured repayment plan. While this process can take several years, it can help you pay off your debt more efficiently and at a lower overall cost.

The bottom line

While the Federal Reserve’s upcoming rate cut could be a good thing for certain types of borrowers, it’s unlikely that credit card rates will decline significantly as a result. Given the slow and muted effect of Fed rate cuts on credit card interest rates, waiting for your card issuers to lower rates might not be the most effective strategy for reducing your debt burden. Comparing the alternatives, like balance transfers, debt consolidation or enrolling in a debt management program, could offer more immediate and substantial savings instead.