Home equity loans offer a cheaper way to borrow than credit cards or personal loans, but there are risks to consider. rising interest rates and inflation are just two things to be cautious about.
Both home equity loans and home equity lines of credit (HELOCs) offer homeowners access to their accumulated home equity at a much cheaper price point than many alternative credit options. While credit card interest rates sit just under 24% now – a record high – and personal loan interest rates hover around 12%, qualified homeowners can secure a home equity loan with a rate of 8.38% now and a HELOC at 8.53%.
That equates to significant savings each month – and over the typical 10 or 15-year repayment period home equity loans typically come with.Still, borrowing from your home equity isn't risk-free, either. If you fail to repay all that you've borrowed (with interest), you could risk losing your home in the exchange. But even if you can comfortably manage your home equity loan payments, there are some other notable risks to avoid, particularly in today's evolving economic climate with inflation rising and interest rates being reduced. Below, we'll break down three home equity loan risks to know going into 2025.Start by seeing what home equity loan rate you could lock in here now.3 home equity loan risks to know going into 2025Borrowing with a home equity loan can be both smart and effective, especially in today's unique economic climate. To make it more valuable, homeowners should be aware of these risks (and take steps to avoid them):Interest rates could riseThe hope that inflation would cool in a straight line downward - and that interest rates would follow - hasn't played out in recent months. Inflation rose in October and again in November and now sits at 2.7%, almost a full percentage point above the Fed's 2% goal. So waiting for a lower home equity loan rate to materialize in 2025 is risky when you can secure one close to 8% right now. Unlike mortgage interest rates, which are driven by a variety of factors, home equity loan rates track closely alongside the federal funds rat
HOME EQUITY LOANS HELOCS INTEREST RATES INFLATION FINANICAL RISKS
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