No single bank has the "best" rates for everyone
Home equity loan rates depend on your credit score, how much equity you have, how much you want to borrow, and what the market is doing that week. Bank A might offer 7.5% to someone with a 750 credit score and 40% equity, while Bank B offers 7.2% to the same person — but Bank B might charge $2,000 more in fees. A third lender might offer 7.8% but have no origination fee. The "best" rate is the one that costs you the least money over the life of the loan, which means comparing the full picture, not just the interest rate number.
What matters more than chasing the lowest advertised rate is understanding what moves rates up and down, then shopping across the right places. Most people find competitive offers by checking their current bank, credit unions they're may be able to access to join, and online lenders — then comparing the actual cost of each offer side by side.
Key Takeaways
- Your credit score, the amount of equity in your home, and how much you want to borrow all affect the rate you're offered, so the same lender quotes different rates to different people.
- The lowest advertised rate is not the same as the lowest total cost — you must compare interest rate, origination fees, appraisal fees, and closing costs together.
- Credit unions often have lower rates than banks for members, but you must first confirm you're may be able to access to join one in your area.
- Getting rate quotes from at least three lenders takes a few hours and shows you the real range of offers available to you personally.
- Rates change daily, so a quote is only good for a set number of days — usually 15 to 30 — before the lender can change it.
What actually determines the rate you'll be offered
Your credit score is the single biggest factor. A score of 740 and above typically gets the best rates most lenders offer. A score between 680 and 739 usually means a rate 0.5% to 1% higher. Below 680, rates jump significantly, and some lenders won't offer you a loan at all. If your score is lower than you'd like, you can ask the lender what score range gets their best rate, then decide whether to wait and improve your score or accept a higher rate now.
Your home equity is how much of your home you own outright. If your home is worth $300,000 and you owe $200,000 on the mortgage, you have $100,000 in equity. Most lenders let you borrow up to 80% to 85% of your home's value, minus what you still owe. The more equity you have, the lower your rate, because the lender's risk is smaller. Lenders also want to see that you've been paying your mortgage on time — late payments or a foreclosure in your history will raise your rate or disqualify you.
How much you want to borrow affects the rate too. Borrowing $15,000 might get a different rate than borrowing $75,000 from the same lender. Larger loans sometimes get slightly better rates because the lender's cost to process them is spread over a bigger amount.
Market conditions move all rates up and down together. When the Federal Reserve raises interest rates, home equity loan rates rise across all lenders. When the Fed cuts rates, lenders usually lower theirs too — but not always by the same amount or on the same day.
Where to get rate quotes and what to compare
Start by getting quotes from at least three sources: your current bank, a credit union you're may be able to access to join, and one online lender. This takes a few hours but shows you the real range available to you. When you ask for a quote, the lender will ask about your income, credit score, home value, and how much you owe on your mortgage. They'll pull your credit report (which temporarily lowers your score by a few points, but multiple inquiries within 14 days count as one inquiry).
When you receive quotes, compare these numbers side by side: the interest rate, the origination fee (usually 1% to 5% of the loan amount), the appraisal fee (typically $300 to $700), and any other closing costs. A lender with a 7.2% rate and a $3,000 origination fee might cost you more over 10 years than a lender with a 7.5% rate and a $500 origination fee. Use an online calculator or ask each lender to show you the total interest you'll pay over the full loan term.
Also ask about the Annual Percentage Rate (APR), which includes the interest rate plus fees, spread over the loan term. The APR is a better single number to compare than the interest rate alone, because it accounts for fees. However, APR calculations can vary slightly between lenders, so don't rely on APR alone — still compare the actual dollar amounts.
Credit unions often have lower rates than banks
Credit unions are member-owned financial institutions that typically offer lower rates on loans than traditional banks. Many credit unions offer home equity loans at rates 0.5% to 1% lower than banks, and they often have lower fees. The catch is that you must be may be able to access to join. may be able to access varies — some credit unions serve people who work for a specific employer, live in a specific county, or belong to a specific organization. Others have broader membership.
To find credit unions you might join, visit CO-OP or Alliant's credit union locator websites, or search "credit unions near me." Call and ask about membership requirements and their current home equity loan rates. If you're may be able to access, get a quote. Even if the rate isn't the lowest, the lower fees might make the total cost competitive.
Online lenders and banks: when to use each
Online lenders like LendingClub, Upgrade, and SoFi advertise heavily and process applications quickly — sometimes in days rather than weeks. They work well if you want speed or if your local banks have turned you down. However, their rates are not automatically lower than banks; they vary based on your credit and situation just like any lender.
Traditional banks (Chase, Bank of America, Wells Fargo, regional banks) have the advantage that you may already have a relationship with them, which sometimes means a slightly better rate or waived fees. They also tend to have local branches if you need to sign documents in person. The downside is that big national banks often have higher rates than credit unions or smaller online lenders.
Regional and community banks sometimes offer competitive rates and may be more flexible with borrowers who have less-than-perfect credit. If you have a local bank, it's worth getting a quote.
How to lock in a rate and what happens next
Once you've chosen a lender, you'll move into the formal process process. The lender will order an appraisal of your home (you usually pay for this upfront, though some lenders refund it if you don't close). The appraisal confirms your home's value and takes 1 to 2 weeks.
Before you close, the lender will give you a Closing Disclosure — a document that shows the final interest rate, all fees, the monthly payment, and the total amount you'll pay over the life of the loan. You have the right to review this for at least three business days before signing. If the numbers don't match what you were quoted, ask the lender why before you sign.
You can lock in a rate at any point during the process, which freezes your interest rate for a set number of days (usually 30 to 60). If rates drop during that time, you're stuck with your locked rate. If rates rise, you're protected. Ask the lender whether rate locks are free or cost a fee, and how long the lock lasts.
Red flags and common mistakes
Don't assume the advertised rate applies to you. Ads show the best rate the lender offers, usually to borrowers with excellent credit and lots of equity. Your actual rate will likely be higher.
Don't compare rates across different days. Rates change daily, so a quote from Monday is not comparable to a quote from Wednesday. Get all your quotes within the same day or two.
Don't ignore fees. A lender with a 0.3% lower rate but $2,000 more in fees might cost you thousands more over 10 years. Always calculate the total cost, not just the rate.
Don't borrow more than you need just because you can. The more you borrow, the more interest you'll pay. Borrow only what you actually plan to use.
Frequently Asked Questions
What credit score do I need for a home equity loan?
Most lenders require a score of at least 620, but the best rates start at 740 and above. If your score is below 620, some lenders will still work with you, but your rate will be significantly higher. Check with credit unions and community banks, which sometimes have more flexible requirements than national banks.
Can I get a home equity loan if I'm still paying off my mortgage?
Yes. You can borrow against your equity while you still owe money on your mortgage. The lender will check that you're current on your mortgage payments. If you've missed payments or are behind, most lenders will decline you or offer a much higher rate.
How long does it take to close a home equity loan?
From process to closing usually takes 2 to 4 weeks, depending on how quickly you provide documents and how long the appraisal takes. Online lenders sometimes move faster. Ask the lender for a timeline before you explore.
What's the difference between a home equity loan and a home equity line of credit?
A home equity loan gives you a lump sum upfront that you repay in fixed monthly payments over a set term (usually 5 to 20 years). A home equity line of credit (HELOC) works like a credit card — you draw money as you need it, pay interest only on what you've borrowed, and can borrow again as you repay. HELOCs usually have variable rates that change with the market, while home equity loans have fixed rates.
Should I pay off my home equity loan early?
Paying early saves you interest, but check your loan documents first for prepayment penalties (some lenders charge a fee if you pay off early). If there's no penalty, paying extra toward principal each month or making a lump-sum payment when you can will reduce the total interest you pay.