$40,000 Home Equity Loan Slightly Cheaper Than HELOC This May

High household debt, credit card rates around 20 percent and rising inflation have left millions of Americans seeking quick access to substantial financing. Homeowners have two solid choices: home equity loans and home equity lines of credit, or HELOCs.

US home equity reached a record high in 2025, with more than $10 trillion borrowable. Homeowners hold hundreds of thousands in equity on average, so borrowing $40,000 leaves a solid cushion. May presents a good opportunity to tap these funds.

Average rates for both products sit close together now. Home equity loans carry fixed rates at 6.98 percent that stay put regardless of market shifts. Borrowers put up their home as collateral. HELOCs use variable rates at 7.04 percent that adjust monthly with interest trends.

Here are monthly costs for $40,000 over common terms, assuming the HELOC rate holds steady:

For home equity loans:
10-year term at 6.98 percent: $464.02 per month
15-year term at 6.98 percent: $359.08 per month

For HELOCs:
10-year term at 7.04 percent: $465.26 per month
15-year term at 7.04 percent: $360.43 per month

The home equity loan edges out slightly on cost each month. Its fixed rate adds security against future hikes and aids precise budgeting.

HELOC figures above assume full draw and immediate repayment. Many lenders require only interest payments during a draw period, often followed by full repayment after 10 years. That option cuts payments further. Borrowers must weigh repayment plans alongside affordability before applying.