Borrowing money via a home equity loan has multiple advantages right now. For starters, the average home equity amount currently sits around $320,000, giving homeowners access to a large amount of money to borrow from. And because the home serves as collateral, interest rates on home equity loans are much lower than some popular alternatives. While the average interest rates on personal loans sit close to 13% now and are near 23% for credit cards, home equity loan interest rates for qualified borrowers are in the mid-8% range now, making them nearly three times cheaper than credit cards.

Still, home equity loan usage isn’t risk-free, particularly in the developing interest rate climate of 2025. To better improve their chances of borrowing success, then, it helps if homeowners know some important dos and don’ts this year. Below, we’ll break down four to know now.

Start by seeing how low of a home equity loan interest rate you could secure here.

Home equity loan dos and don’ts to know for 2025

By making these moves — and refraining from others — home equity loan users will more easily accomplish their financial goals this year:

Do: Get started early

It can take anywhere from two weeks to two months, approximately, to have your home equity loan funds disbursed. You’ll need to have an appraisal completed and schedule and complete a closing on the loan. That will come after you’ve formally applied and provided both initial documentation and additional follow-up documentation. And it will come after you’ve done your research by shopping around for lenders and rates. So, if you’re planning to take out a home equity loan and need the funds relatively soon, it makes sense to get started early.

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Don’t: Use it for the wrong reasons

A home equity loan can be a smart and effective tool to finance home repairs and projects and for consolidating debt, especially in today’s elevated rate climate. And if it’s used for eligible home repairs, specifically, borrowers may be able to deduct the interest paid on their taxes. But using it for the wrong reasons, like paying for depreciating assets, can be risky and should be avoided. Since your home functions as collateral here, you’ll want to make sure that any intended use will improve your financial situation, not harm it.

Do: Shop around for lenders

Home equity loan repayment periods range from 10 to 15 years, on average. Even a minor difference in interest rates between lenders can result in substantial savings over time. So spend the time to shop around for lenders. You can use a different bank from your current mortgage lender. Get rate quotes from at least three different lenders for the same loan amount to complete an accurate, apples-to-apples comparison. With home equity loan rates on a steady decline for much of the last year, it’s critical to find — and lock — the lowest rate available now.

Don’t: Assume rates will continue to fall

Because home equity loan interest rates fell by more than half a percentage point over the last year prospective borrowers may be tempted to wait for them to fall even lower. And while additional reductions in the federal funds rate are expected this year — which will cause home equity loan rates to fall in tandem — the pace of rate cuts is forecast to come more slowly in 2025 versus the final months of 2024. Waiting for a minor rate reduction, then, should be avoided. Even if rates were to fall significantly once you’ve locked today’s rate, you could always refinance at that point. Delaying an application, however, won’t be particularly helpful.

The bottom line

By taking a strategic approach to your home equity borrowing you can improve your chances of success both in 2025 and over the full repayment period. Just be cautious whenever using your home as a funding source. Since your home is collateral in this scenario you could risk losing it to the lender if you fail to meet your repayment requirements as agreed upon.