When it comes to financing a major expense, whether it's a home renovation, unexpected repair, or large personal purchase, choosing the right lending option is essential. Two common choices are a Home Equity Line of Credit (HELOC) and a personal loan. While both can provide access to funds, the right solution for you depends on your financial goals, timeline, and borrowing preferences.
We’ll break down the key differences between a HELOC and a personal loan so you can compare your options with confidence.
What Is a HELOC?
A Home Equity Line of Credit (HELOC) allows you to borrow against the equity in your home. It works similarly to a credit card, offering a revolving line of credit that you can draw from as needed—usually with a lower interest rate than unsecured loans.
Key Features:
- Secured by your home’s equity- Typically, lower interest rates
- Flexible draw and repayment periods
- Ideal for ongoing or unpredictable expenses (e.g., home renovations)
What Is a Personal Loan?
A personal loan is an unsecured loan that provides a lump sum upfront. You repay it over a fixed term with a set interest rate and monthly payment.
Key Features:
- Not tied to your home or any collateral- Fixed loan amount and repayment schedule
- Often higher interest rates than HELOCs
- Ideal for one-time expenses (e.g., debt consolidation or unexpected costs)
HELOC vs. Personal Loan: Key Differences
|
Feature |
HELOC |
Personal Loan |
|
Collateral Required |
Yes (home equity) |
No |
|
Interest Rate |
Typically lower, variable |
Typically higher, fixed |
|
Flexibility |
Draw as needed |
Lump sum only |
|
Use Case |
Ongoing or large projects |
One-time expenses |
|
Repayment |
Variable |
Fixed schedule |
Which Is Right for You?
A HELOC may be the better option if:
You’re planning a multi-phase home project or need ongoing access to funds
You want lower interest rates and flexible borrowing terms
You’re comfortable using your home equity as collateral
A personal loan may be better if:
You don’t want to use your home as security
You prefer predictable, fixed monthly payments
You need a lump sum for a one-time purchase
Compare Your Options and Apply Today
Choosing the right financing option depends on your individual needs—but you don’t have to decide alone. Our team is here to help you compare terms, rates, and repayment plans that fit your goals.
Ready to move forward?
Compare HELOC and personal loan options and apply today.
