Home equity loan rates depend on many factors. The first factor is the market conditions. During volatile periods of war or oil shortages, for example, the interest rates may be high. This means that when you take out a home equity loan, most of your payments for the first few years will go in interest, with very little coming off the principal. The money that lenders give you in a loan comes from many sources – investors, bankers, deposits at banks. These investors want a return on the money and this comes out of the interest that you pay on the loan.Many lenders offer homeowners a home equity line of credit as opposed to a home equity loan with one lump sum payment. The home equity loan rates on a line of credit are charged monthly and only on the outstanding balance of your account. This way, if interest rated drop, you get the benefit of the lower rate. If you take out a home equity loan at a high rate of interest, you might want to refinance it at a lower rate. The problem is that you are only allowed to refinance a home equity loan once during its term, so you are kind of limited when it comes to getting the best interest rate.Home equity loan rates can also be fixed or adjustable. This means if you take out a home equity loan, you can have an interest rate that changes monthly, semi-annually or annually. If you don’t mind having a different amount of payment each month, then you can take advantage of lower interest rates when they go down. If you have a fixed loan rate, then that is the interest rate you are stick with for the duration of your term. This doesn’t mean that you have to pay the high interest rate for 30 years because most homeowners lock in the payments for 1, 2 or 5 years and then renew at the end of that time.Home equity loan rates for a line of credit involve variable interest rates, rather than fixed. Most of the time the loan rate is about 2 percentage points above the prime lending rate set by the government. They also have a ceiling gap, which sets a limit on high the interest rate on the loan can rise over the life of the loan. Some variable rate plans have a limit on how high your payment can rise or fall.Home equity loan rates are such that the amount of your payment that goes toward the principal of the home equity line of credit is not enough to repay the full loan in the term specified. You can pay as much as you want over the amount each month, which not only reduces your interest, but lets you pay off the loan sooner. You can choose interest only loans, where you pay only the interest and then the full amount of the loan at the end of the term. You do have to look at all your options and choose the one that is right for your financial situation.