HELOC vs Personal Loan: Which Should You Choose?

The quick answer: HELOCs are cheaper. Personal loans are faster and don't put your home at risk.

Both let you borrow money—but they work differently, cost differently, and fit different situations. Here's how to decide which is right for you.

HELOC vs Personal Loan: Side-by-Side Comparison

How HELOCs Work

A HELOC is a revolving line of credit secured by your home equity. Think of it like a credit card, but with much lower rates and much higher limits.

Draw period (usually 5-10 years): You can borrow, repay, and borrow again up to your credit limit. Many lenders require interest-only payments during this phase.

Repayment period (10-20 years): You can't borrow more. You pay down the principal plus interest on a fixed schedule.

Key feature: You only pay interest on what you actually borrow. If your HELOC limit is $50,000 but you only use $10,000, you only pay interest on $10,000.

→ Read our complete guide: What Is a HELOC?

How Personal Loans Work

A personal loan gives you a lump sum upfront that you repay in fixed monthly installments over a set term (typically 2-7 years).

Fixed rate, fixed payment: You know exactly what you'll pay every month from day one. No surprises.

No collateral: Personal loans are unsecured. If you default, the lender can't take your house—though they can wreck your credit and pursue collections.

One-time funding: You get the money once. If you need more later, you apply for a new loan.

The Cost Difference Is Significant

Let's compare borrowing $30,000:

HELOC at 9%:

• Monthly interest (on $30,000): ~$225
• If you pay $500/month, you pay off in ~6.5 years
• Total interest paid: ~$9,000

Personal loan at 12.37% (5-year term):

• Monthly payment: ~$675
• Total interest paid: ~$10,500

That's $1,500+ in savings with the HELOC—and more flexibility since you can pay it down faster without penalty.

The savings grow larger with bigger loan amounts. On $75,000, you could save $4,000+ with a HELOC over a personal loan.

When to Choose a HELOC

You Need $25,000 or More

For larger amounts, HELOCs make financial sense. The rate difference saves real money, and personal loan limits often cap at $50,000-$100,000 anyway.

Your Expenses Are Ongoing or Unpredictable

Renovating a house? You might not know the final cost upfront. A HELOC lets you draw funds as needed rather than borrowing everything at once.

You're Using Funds for Home Improvement

HELOC interest is tax-deductible when funds are used for home improvements (thanks to the Tax Cuts and Jobs Act). Personal loan interest is never deductible. That's essentially an extra discount on your HELOC rate.

Rate Matters More Than Speed

If you can wait 2-3 weeks (or 7 days with HonestCasa), the lower rate is worth it for large borrowing amounts.

You Have Significant Equity

You need at least 15-20% equity in your home to qualify for a HELOC. If you have it, use it—that's what equity is for.

When to Choose a Personal Loan

You Need Money Fast

Personal loans fund in days. Some online lenders approve and fund same-day or next-day. Traditional HELOCs take 4-6 weeks.

If you have an emergency that can't wait, a personal loan might be your only option.

You Don't Want to Risk Your Home

This is the big one. A HELOC is secured by your home. If you can't pay, the lender can foreclose.

A personal loan has no collateral. Default hurts your credit badly, and you'll face collections—but you won't lose your house.

If you're uncertain about your income stability or worried about job security, a personal loan might be the safer choice despite the higher rate.

The Amount Is Smaller ($10,000-$25,000)

For smaller amounts, the interest savings from a HELOC shrink. If you're borrowing $10,000, the total interest difference over 3-4 years might only be a few hundred dollars—not worth the complexity and risk of putting your home on the line.

You Prefer Fixed Payments

HELOCs typically have variable rates. Your payment can change monthly based on market rates. Personal loans lock in your rate and payment from day one.

If predictability matters more than savings, a personal loan offers peace of mind.

You're Renting (Or Have Little Equity)

No equity means no HELOC. If you rent or recently bought your home, personal loans are your main option.

Real Scenarios: Which Would You Choose?

Scenario 1: $40,000 Kitchen Renovation

Choose: HELOC

• Large amount maximizes rate savings
• Home improvement = tax-deductible interest
• Renovation costs are unpredictable (HELOC's flexibility helps)
• You can wait 2-3 weeks to start the project

Scenario 2: $8,000 Emergency Medical Bill

Choose: Personal Loan

• Smaller amount (less interest savings from HELOC)
• Need funds fast for medical situation
• Not worth putting home at risk for this amount

Scenario 3: $25,000 Debt Consolidation

Choose: HELOC (if rate-focused) or Personal Loan (if risk-averse)

• HELOC saves money on rates
• But you're converting unsecured debt to secured debt
• If the debt you're consolidating was recklessly accumulated, do you trust yourself not to do it again?

→ Read more: HELOC for Debt Consolidation

Scenario 4: $50,000 Starting a Business

Choose: Personal Loan

• Businesses can fail
• Don't bet your house on a new venture
• Use the higher interest rate as motivation to make the business work

The Speed Gap Is Closing

Traditional HELOCs take 4-6 weeks. That's why many people choose personal loans even when HELOCs would save them money—they can't wait.

HonestCasa closes HELOCs in as few as 7 days. That changes the calculus. You get the lower rates of a HELOC with turnaround time competitive with personal loans.

The Honest Risk Conversation

We'd be doing you a disservice if we didn't emphasize this:

A HELOC puts your home at risk. A personal loan does not.

If your income is unstable, if you have a history of financial struggles, or if you're borrowing for something risky (business, investment, speculation)—think twice before using home equity.

The lower rate isn't worth it if you end up losing your house.

Use HELOCs for stable situations: home improvements, predictable expenses, consolidating debt when you've genuinely fixed the spending habits that created it.

Make Your Decision

Choose a HELOC if:

• You're borrowing $25,000+
• You have significant home equity
• You can wait 1-3 weeks for funding
• You're using funds for home improvement
• Your income is stable

Choose a personal loan if:

• You need money in days, not weeks
• You're borrowing a smaller amount (<$25,000)
• You don't want to risk your home
• You prefer fixed monthly payments
• You don't have home equity

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Ready to See Your HELOC Options?

If a HELOC makes sense for your situation, HonestCasa can help you close in as few as 7 days—not the 4-6 weeks traditional lenders require.

Get your estimate in minutes → Check your rate

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Still weighing your options? Check out our HELOC Requirements guide to see if you qualify.