Home equity loans and home equity lines of credit (HELOCs) allow homeowners to tap into the value of their homes. A home equity loan is a fixed-rate, lump-sum loan that allows homeowners to borrow up to 85% of their home’s value and pay that amount back in monthly installments.

For example, a $100,000 home equity loan can provide the capital needed for substantial home improvements, debt consolidation or other significant financial needs — and considering that the average homeowner has over three times that amount of equity currently,

Home equity rates are still down substantially from the highs of this time last year. Greg McBride, chief financial analyst at Bankrate, forecasts that rates will continue to decline in 2025, especially those of HELOCs. They will average 7.25 percent, he thinks — which would be their lowest level in three years.

Home equity rates are still down substantially from the highs of this time last year, with HELOCs near a two-year low. McBride forecasts that HELOC rates will continue to decline in 2025, averaging 7.25 percent, their lowest level in three years.

Both have benefits, but for many homeowners, a $100,000 home equity loan could make more sense now. Here's why.