Personal Loan vs. Home Equity Loan
A personal loan is typically unsecured and based on creditworthiness, while a home equity loan is secured by the home itself, generally offering a lower rate in exchange for putting the home up as collateral.
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Personal Loan
An unsecured loan based primarily on creditworthiness and income, not tied to home equity as collateral.
- No home equity required, and the home isn't used as collateral
- Often a faster approval and funding process than a secured loan
- No home appraisal or extensive equity-related paperwork needed
- Typically carries a higher interest rate than a home equity loan
- Loan amounts are often smaller than what's available through home equity
Home Equity Loan
A loan secured by the home's equity, generally offering a lower interest rate in exchange for the home serving as collateral.
- Typically a lower interest rate than an unsecured personal loan
- Can access larger loan amounts based on available equity
- The home serves as collateral, so it's at risk if you're unable to repay
- Requires an appraisal and more extensive closing paperwork, taking longer to fund
Which one makes sense for you?
A home equity loan generally offers a lower interest rate for larger amounts, but puts the home at risk as collateral and takes longer to close due to appraisal and paperwork requirements. A personal loan funds faster and doesn't risk the home, but typically comes with a higher rate and smaller available loan amounts.
Key cost factors.
- How much home equity you actually have available
- How quickly you need the funds
- Your comfort putting the home up as collateral versus an unsecured loan
- The loan amount you need relative to what each option typically offers
Before you decide.
- How much home equity do I actually have available to borrow against?
- How does the total cost, including rate and fees, compare between these two options?
- How urgently do I need the funds, given each option's typical funding timeline?
Frequently asked questions.
Is a personal loan a good option for a small home improvement project?
It can be, especially for smaller projects where the faster funding timeline and avoiding home equity paperwork outweighs the typically higher interest rate compared to a home equity loan.
All figures on this page are illustrative examples for general education, not quotes, appraisals, or guarantees of actual pricing. Actual costs vary by provider, location, project scope, and market conditions — always get a specific quote before making a purchasing decision.
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