If your home equity loan will have a variable interest rate, your monthly payments may change. Assume, for example, that you borrow $30,000 under a plan that calls for interest-only payments. At a 10 percent interest rate, your monthly payments would be $249. If the rate rises over time to 15 percent, your monthly payments will increase significantly. Similarly, if you are making payments that cover interest plus some portion of the principal, your monthly payments may increase, unless your agreement calls for keeping payments the same throughout the plan period.

The best way to know if you are getting a good deal on a home equity loan is to compare different loan plans. Be sure and compare interest rates, late fees, and the general terms and conditions.