Here’s how much you’d save by using a home equity loan

For much of the past two years, borrowers have had limited options. Thanks for growing inflation and higher interest rate designed to cool it, borrowers have been stuck paying more for everything from home and car loans to personal loans and credit cards. And with inflation rising again, and interest rates stuck at their highest point in 23 years, it can seem like there are no viable borrowing options.

However, homeowners have a low-cost alternative worth pursuing now: theirs home heritage. By using a home loan or Home Equity Line of Credit (HELOC) right now, homeowners can access significant sums of money at a much lower rate than they would have secured with other credit options. And they may be able to tap into hundreds of thousands of dollars, as the average homeowner has $300,000 of home equity right now (about $190,000 of which is accessible).

However, to fully understand the cost savings of this option, borrowers must first compare it to other popular alternatives. Below, we'll break down how much you could save by using a home equity loan right now.

See how much you could borrow with a home equity loan today here.

Here's how much you'd save by using a home equity loan

To truly understand the savings potential of a home equity loan, you'll need to know the average interest rate it carries. From April 18, the average home equity loan rate is 8.59%. The average credit card interest rate is now 20.71% and the average personal loan interest rate is 12.18%. Here's the interest cost for borrowing $10,000 with all three options:

• Home Loans: A 10-year $10,000 loan would cost you $124.47 per month for a total of $4,396.11 in interest paid over that time. But unlike credit cards and personal loans, the interest you pay on the loan can be tax deductible if you use it for qualified home repairs, renovations, and improvements.
• Credit cards: To pay off a $10,000 credit card balance over the same period, you'd have to pay $197 per month ($72.53 more per month than a home equity loan). But the difference in interest paid is even more stark when comparing overall rate costs: $13,758 total versus $4,396.11 for home equity loans (or $9,361.89 in additional interest costs when using credit cards).
• Personal loans: While not as expensive as credit card loans at this point, personal loans still pale in comparison to the cost savings offered by home equity loans. A $10,000 personal loan paid off over a decade would cost borrowers $144.51 per month and $7,341.61 over the life of the loan (or $20.04 more per month and $2,945.50 more than a home equity loan ).

However, it is important to note that rates may change for these loan products. Credit card interest rates will evolve and you can refinance personal loans to secure better terms. But you can too refinance home equity loans and rates will remain the same, even in the face of a developing rate climate. It makes sense, then, to lock in a low home value loan rate while they're still available.

Get started with a low interest home equity loan here now.

The bottom line

With inflation still problematic and interest rates higher than they have been in years, borrowers should thoroughly explore all options to save money. Home equity loans are some of the best to pursue because of the significant savings they offer both in monthly interest costs and over the life of the loan.

As with all loan options, however, it's crucial to thoroughly research this possibility, as your home will be used as collateral. If you can't afford to pay back what you borrowed, you could risk losing your home in the process. But if you have a well-thought-out payment plan in place, the savings potential of home equity loans makes it clearly beneficial for many borrowers right now.