CBS News
Is a $10,000 home equity loan or HELOC cheaper right now?
Getty Images
It’s always smart to pursue the most cost-effective borrowing option. But in today’s economy, in which millions are still recovering from an elevated inflation cycle, and in which the federal funds rate has left interest rates raised across the board, it’s critical to secure the cheapest option. While popular items like credit cards and personal loans come with double-digit rates right now, homeowners have an inexpensive alternative that they can easily access: their home equity.
While home equity borrowing comes in various forms, two of the most common are home equity loans and home equity lines of credit (HELOCs). Either is arguably better than using credit cards and personal loans, especially for lower amounts like $10,000. Considering that the average homeowner has hundreds of thousands of dollars in equity to access now, borrowing a $10,000 amount will make a small difference in the amount of equity accumulated.
However, prospective borrowers need to know exactly which home equity option is cheaper when looking to borrow $10,000. And, since home equity loans and HELOCs operate in different ways, it’s important to crunch the numbers in advance.
See what home equity loan rate you could lock in here now.
Is a $10,000 home equity loan or HELOC cheaper right now?
In the past, HELOCs have had lower interest rates than home equity loans. But in the current economy, in which rates change often and inflation is still problematic, the opposite is true. Home equity loans come with an average rate of 8.66% (as of May 22) while HELOCs come with an average rate of 9.17%. While close, home equity loans would be better to access $10,000 right now. Here’s what each option would cost monthly, based on 10 and 15-year repayment schedules:
Home equity loans
- 8.66% over 10 years: $124.84 with $4,981.17 in interest for a total of $14,981.17
- 8.66% over 15 years: $99.41 with $7,894.53 in interest for a total of $17,894.53
HELOCs
- 9.17% over 10 years: $127.60 with $5,311.72 in interest for a total of $15,311.72
- 9.17% over 15 years: $102.44 with $8,439.28 in interest for a total of $18,439.28
As can be seen, if you’re looking for the lowest-cost way to borrow $10,000 from your home, a home equity loan is the better way in today’s rate climate. Not only will you save money each month, but you’ll save thousands of dollars in interest over the life of the loan.
Start exploring your home equity loan options online today.
Why a home equity loan may be better than a HELOC now
In addition to the aforementioned savings, a home equity loan also comes with a level of security that HELOCs simply do not. That’s because home equity loan interest rates are fixed while HELOC rates are variable and subject to change as the rate environment evolves. That can be an advantage ahead of imminent rate cuts but is arguably detrimental now when interest rate cuts look delayed indefinitely. So, not only will you get a lower rate by choosing a home equity loan now, but that rate will remain the same even if the rate climate ticks up in the weeks and months to come.
The bottom line
If you need to borrow $10,000 right now, consider skipping personal loans and credit cards and proceed to utilize your home equity instead. When choosing this funding, however, it arguably makes more sense to utilize a home equity loan, thanks to its lower costs and locked-in rate. Just understand that this could change in the future; if rates start falling soon, a HELOC may be better for some borrowers. So do your research in advance and understand that your home is collateral in either borrowing situation, so you will want to ensure that the option you ultimately choose offers you the easiest way to pay back what you’ve deducted.
Learn more about home equity loans and HELOCs here.
Watch CBS News
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.
The Biden administration is beginning to retaliate against China for its sweeping hack of U.S. telecommunications companies earlier this year.
Last week the Commerce Department issued a notice to China Telecom Americas, the U.S. subsidiary of one of China’s largest communications firms, alleging in a preliminary finding that its presence in American telecom networks and cloud services poses a national security risk. The company has 30 days to respond, although the Commerce Department has not said what action it plans to take next.
The New York Times was the first to report the action, which is a direct response to China’s infiltration of telecom networks earlier this year. The China-backed hacking group known as Salt Typhoon penetrated the networks of numerous companies including Verizon, AT&T and Lumen Technologies, a U.S. official familiar with the matter told to CBS News in October.
It’s unclear what the impact on China Telecom would be, since the FCC has already limited China Telecom Americas’ ability to operate in U.S. communications infrastructure. In October 2021, the FCC revoked its license to provide phone services in the US.
The FCC found that China Telecom “is subject to exploitation, influence, and control by the Chinese government and is highly likely to be forced to comply with Chinese government requests without sufficient legal procedures subject to independent judicial oversight.”
China Telecom Americas has not responded to requests for comment.
U.S. law enforcement and intelligence officials are continuing to try to learn more about the scope of the hack, which targeted U.S. surveillance capabilities used for operations including wiretaps. U.S. intelligence officials routinely seek court authorization to use telecom systems like those targeted in the breach to collect information for law enforcement or national security probes.
One fear is that the cyberattacks could have allowed the hackers to access information about ongoing U.S. investigations — including those tied to China — through the collection of sensitive data and techniques.
China’s incursions into U.S. critical infrastructure — including water treatment plants and the electrical grid — have lawmakers on Capitol Hill and the incoming Trump administration warning of a more aggressive retaliatory posture going forward.
Rep. Mike Waltz, designated by President-elect Trump to be national security adviser, told Margaret Brennan on “Face the Nation” Sunday, “We need to start going on offense and start imposing, I think, higher costs and consequences to private actors and nation state actors that continue to steal our data, that continue to spy on us.”
Last month, Rep. Jim Himes, Democrat of Connecticut and the ranking on the House Intelligence Committee, issued a similar warning.
“We’re not just going to name and shame,” he said on “Face the Nation.” “We are going to go into their networks and give as good as we got.”
Watch CBS News
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.