CNET evaluates a range of home equity loan and home equity line of credit (HELOC) lenders based on factors such as interest rates, what types of loans are offered and the requirements to qualify for those loans. We also take into account factors that impact the user experience, such as a lender’s price transparency and how easy it is to apply for a loan online.
Each lender receives a score out of 5. To come up with that composite score, we create subscores, also out of 5, for three different categories: affordability, accessibility and borrower experience. Each subscore is weighted and then factored into the composite score.
Affordability accounts for 45% of each lender’s composite score. Accessibility makes up 20% of the total score, while borrower experience accounts for 35%.
If a lender offers both home equity loans and HELOCs, we provide a score for each product.
Here’s a full breakdown of CNET’s methodology for scoring home equity lenders.
Affordability (45% of score)
When assessing a lender’s affordability, we pay attention to its advertised annual percentage rates (APRs), maximum loan-to-value ratio requirements and minimum loan amounts. To ensure our scores are up to date, we review each lender’s advertised APRs on a monthly basis and compare them to the weekly average from Bankrate’s survey.
APR
APRs account for 50% of each lender’s affordability score. The highest scores go to lenders whose average APRs are at or below the Bankrate national average. Lenders whose advertised APRs are higher than the national average score lower. We offer one additional point to lenders offering introductory APRs. Lenders who do not display average APRs online score a 1.
LTV
Loan-to-value requirements make up 25% of each lender’s affordability score. In general, most lenders require borrowers to have a loan-to-value ratio of 80% or less, meaning the borrower must have at least 20% equity in the home. But many homeowners, especially those who put down less than a 20% down payment when purchasing their homes, have an LTV above 80%. We award lenders who are more lenient to borrowers with higher LTVs. Lenders who have stricter LTV requirements (below the standard 80%) get lower scores.
Loan amounts
Loan amounts account for 25% of each lender’s affordability score. Lenders who offer a broader range of loan amounts, from below $10,000 to $100,000 and up, score the highest. That’s because more loans are accessible to a greater number of borrowers -- from those who need just a few thousand dollars to those who need to finance a major expense. Lenders whose minimum loan amounts are well above the $10,000 mark score lower.
Accessibility (20% of score)
CNET assesses lenders based on their accessibility to borrowers, both in terms of where products are offered geographically and what types of home equity products are available to borrowers.
Nationwide availability
Nationwide availability accounts for 50% of each lender’s accessibility score. We score lenders on a scale of 1 to 5 based on how many states their home equity product(s) are offered in. A lender scores a 5 if it offers either a home equity loan or HELOC in at least 45 states, or 90% of the US.
Loan offerings
Loan offerings account for 50% of each lender’s accessibility score. We rate lenders on how many types of home equity loans or HELOCs they offer. Product offerings are categorized into the following types:
- Home equity loans; standard and variable-rate
- Interest-and-principal HELOCs
- Interest-only HELOCs
- HELOCs with a fixed-rate or rate-lock options
Some lenders offer both home equity loans and HELOCs. Though we have product-based scores, lenders that offer both home equity loans and HELOCs score an additional point.
Borrower experience (35% of score)
Borrower experience includes the ease of finding information on a lender’s website, the online application experience and the range of customer service options available.
Price transparency
Price transparency makes up 45% of each lender’s score for borrower experience. We rate lenders on a scale of 1 to 5 based on their price transparency, defined as how much information you can get about rates and fees without a hard credit check. Comparing rates and fees from multiple lenders is one of the best ways to ensure you’re getting the best deal, and we give high scores to lenders who make it easy to do so.
Lenders who provide personalized quotes for rates, fees and important loan information with only basic personal information (and no hard credit check) receive a 5. Lenders who keep detailed rate and fee information behind a hard credit check score lower.
Online user experience
Online user experience accounts for 30% of each lender’s borrower experience score. We rate lenders on a scale of 1 to 5 based on the ease of their application process. Lenders who have a clear, easy-to-navigate online application process with no technical issues or confusing instructions receive a 5. Lenders who don’t offer an online application at all receive a 1.
Customer service options
Customer service options account for 25% of the borrower experience score. We rate lenders on a scale of 1 to 5 based on how many different customer service options are available to consumers needing help with their loan application or loan servicing.
Examples of customer service options include, but are not limited to, online live chat, phone, email, visiting an in-person branch or virtual appointments with dedicated loan officers. Lenders who have five or more customer service options receive a 5.
For each option available only to existing customers (and not available to new customers needing help with the application process), we deduct a half point from the score. For any lender with a 24/7 customer service option, regardless of whether that’s phone, chat or email, we add 1 to the score. We don’t evaluate the quality of the customer service itself, as that can be subjective and highly dependent on the specific customer service representative a borrower is working with.
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