When considering your borrowing options there’s much to account for. Aside from the interest rate you’ll pay to borrow money, you’ll also need to account for the type of payment your credit comes with (fixed or variable) and the budget you’ll need to pay back what you borrow. But in today’s high-rate climate, there aren’t many viable options to choose from. With credit card rates around 20% right now and personal loan rates over 12%, neither offers borrowers a cost-effective way to make ends meet.

Home equity borrowing for homeowners, however, can. Home equity loans and home equity lines of credit (HELOCs) are both worth pursuing right now. However, the timing here is key and there’s a compelling case to be made that there are more timely benefits for home equity loans versus HELOCs. Below, we’ll detail three of these benefits for homeowners to evaluate.

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3 timely home equity loan benefits that HELOCs don’t offer

Here are three important home equity loan benefits compared to HELOCs in today’s unique economic climate:

Lower rates

While HELOCs often come with lower interest rates than home equity loans, that’s not the case right now. The average home equity loan interest rate is 8.66% while the average HELOC rate is 9.89%. With a little negative economic news, the average rate on a HELOC could easily expand into the double digits soon. 

While that 1.23% difference in rates may not seem substantive on paper, it will be in the time it takes to pay back what you borrow. And with interest rates seemingly high across the board for all borrowing options right now, it behooves owners to go with the lowest rate out there.

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Fixed rates

Not only will that lower home equity loan rate save you more money, both in the long run and in your monthly payments, but it will be fixed until you pay it off (or until you refinance). This is a major advantage in today’s economy with the federal funds rate already at its highest point in 23 years — and the prospect for that rate to increase growing by the day. If that happens, the rate on a HELOC will head up, too, thanks to its variable nature. However, the lower home equity loan rate will remain the same.

Predictability 

The more predictable your monthly expenses are, the easier it will be to budget for them. This is always important, but particularly so in today’s inflationary climate. Unexpected expenses could be the difference between making ends meet and not. A HELOC, then, with its higher, variable rate, should be avoided. A home equity loan, however, will be easy to budget for as you will be able to predict exactly what you will pay each month — and when that loan will be paid in its entirety. 

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The bottom line

It’s always a good idea to be judicious about your borrowing options. But, in today’s economy, in which interest rates could rise again soon, it’s mandatory. For homeowners, borrowing from their accumulated home equity can be a cost-effective way to gain access to extra funds. But because their home is the collateral in these circumstances, any borrowing needs to be done in a smart and careful way. So it’s important to understand that home equity loans are simply the better, timelier option currently. Thanks to a combination of lower, fixed rates and their predictable nature, homeowners considering accessing their equity should strongly consider home equity loans instead of HELOCs right now.