The average American homeowner with a mortgage has over $300,000 in equity in their home’s current value. You can access that equity through home equity loans or home equity lines of credit (HELOC) for anything, such as home renovations or other financial needs. The amount you can borrow depends on the current market value of your home and how much debt you may already have on it.

You can get home equity loans from online lenders, mortgage lenders, banks, and credit unions. With so many options available, it’s important to compare fees and rates, using the annual percentage rates (or APRs) on the various offers available to find the best home equity loans. Check the qualification requirements for each lender, such as their debt-to-equity ratio (DTI), combined loan-to-value (CLTV), and minimum credit score requirements.  

5 Best Home Equity Loans

APRMax CLTVMinimum Credit Score
U.S. Bank8.40%80%660
Spring EQNot Disclosed97.5%620
Navy Federal6.640%100%Not Disclosed
Third Federal7.29%80%Not Disclosed

We assessed 15 lenders based on factors such as loan terms, annual percentage rates (APRs), application process, and customer reviews. Here are our top five recommendations for the best home equity loans.

1. U.S. Bank- Best Overall

  • APR: 8.40%
  • Max CLTV: 80%
  • Minimum Credit Score: 660

U.S. Bank offers HELOCs and home equity loans in 47 states. There are a variety of terms available, up to 30 years. The lender also offers a loan estimate over the phone without the need to complete an application.

2. Spring EQ- Best for Easy Online Applications

  • APR: Not disclosed
  • Max CLTV: 97.5%
  • Minimum Credit Score: 620

While Spring EQ doesn’t display its rates online, you can get prequalified with your basic information to see personalized rates. Borrowers also need to pay an origination fee of $995.

3. Navy Federal Credit Union- Best for Military Members

  • APR: From 6.640%
  • Max CLTV: 100%
  • Minimum Credit Score: Not Disclosed

If you’re a member of the military or a veteran, you can take advantage of the low rates offered by Navy Federal Credit Union. With this lender, you can often borrow up to 100% of the equity in your home, get a fixed interest rate, and pay $0 in closing costs on your home equity loan.

4. Discover- Best for Bad Credit

  • APR: From 7.24%
  • Max CLTV: 90%
  • Minimum Credit Score: 620

If you’re looking for a home equity loan with bad credit, Discover Bank is a solid option. Other than the competitive rates, the lender charges no origination fees, no appraisal fees, and no application fees. You can apply for the loan over the phone or online.

5. Third Federal- Best for Adjustable-Rate Home Equity Loan

  • APR: From 7.29%
  • Max CLTV: 80%
  • Minimum Credit Score: Not Disclosed

Other than the standard fixed-rate home equity loans, Third Federal Savings & Loan also offers 5/1 adjustable-rate home equity loans, where your interest rate will be fixed for the first five years before converting to a variable interest rate that resets annually, on your loan’s anniversary date, based on a predetermined interest rate index, like the U.S. Prime Rate or the current yield on the 10-year U.S. 

Treasury Note. Another perk is the lowest-rate guarantee Third Federal offers, which ensures you can get the lowest possible rate (or APR) compared to similar lenders.

What Are Home Equity Loans and How Do They Work?

Your home equity is the difference between what you owe on your mortgage loan and the current value of your home. Your equity is an asset, and you can borrow against it through loan products like home equity loans and home equity lines of credit (HELOCs).

A home equity loan is a second mortgage with a fixed interest rate. You’ll typically need 15% to 20% equity in your home before you can borrow against it. You’ll get a lump sum amount upfront at the beginning of your loan, which you can use for any purpose.

The interest rate you’ll qualify for will depend on a number of factors, in addition to the current level of interest rates in general, such as your credit score, the amount you’re borrowing, and your debt-to-income ratio.

Factors To Consider When Choosing a Home Equity Loan

The best home equity loan is one that offers you the best interest rate and manageable loan terms. When comparing different lenders, here are some factors to consider.

Interest Rates

Try to find a lender that offers you the lowest possible home equity rate you qualify for. It’s always worth the time to pre-qualify with a few different lenders to compare your options. Keep in mind that closing costs can be 2% to 5% of the loan, and some lenders may charge additional fees. Read the terms and conditions carefully before you sign a loan agreement. 

When choosing among multiple home equity loan offers, it is always best to use the annual percentage rate (aka, the APR) because the APR percentage shown includes not just the interest rate charged but also the cost of any fees or charges that you may have to pay throughout the term of the loan.  

The APR is best to use for comparison because it represents an annual % that reflects the true cost of borrowing when all is said and done. By using the APR, rather than simply the interest rate, you are better able to compare loans on an “apples-to-apples” basis.

Loan Terms and Repayment Options

Loan terms for home equity loans usually start at five (5) years. However, some lenders may offer longer terms ranging from ten to 30 years. While your monthly payments will be more affordable if you have a longer term, you’ll pay more in interest (i.e., dollars of interest paid) over the life of the loan. Pick a loan term that you’re comfortable with and fits your budget the best while keeping you from paying interest on a loan for decades at a time.

Eligibility Criteria and Requirements

You’ll typically need a FICO credit score of at least 620, equity of at least 15%, and a debt-to-income ratio of no more than 43% to qualify for a home equity loan. Check the eligibility criteria of the lender you’re interested in working with to see if you qualify.

The best home equity loan rates are reserved for borrowers with the best credit. However, you still have options if you have bad credit.

Choose the Best Home Equity Loan for You

Most lenders offering mortgages also offer home equity products. You’ll also find lenders that specialize exclusively in HELOCs and home equity loans. Your current mortgage lender is a good place to start, but there are plenty of other options available.

“To ensure you get the best loan amount and terms for your home equity loan or line of credit, it’s always best to get an appraisal of your home’s current value when compared to the current market,” says Brad Reichert, the founder and managing director of Reichert Asset Management LLC.

“That way, you get an accurate “fair market value” for your home based on its condition, location, and features," explains Reichert. "This should always be done by a certified Real Estate Appraiser who is experienced in determining the values of homes in your area," he adds. 

To determine the right loan solution for you, compare different types of home equity lenders and pre-qualify with a few of them to get a clear idea about the rates, fees, and perks they offer. We also recommend considering other types of loans, such as 1) HELOCs if you prefer having a credit line with a draw period; and/or 2) a cash-out refinance if you prefer refinancing your existing mortgage balance instead of taking on a home equity loan/line of credit.