Home equity loan vs personal loan: tips to help you make the right choice

By Jackie Lam

Reviewed by Kimberly Rotter

Mar 12, 2023

Read time: 5 min

a woman and a child in a kitchen.

Key takeaways

  • Home equity loans are usually larger than personal loans, and give you more time to repay.

  • Personal loans are usually based on your creditworthiness, and don't rely on you owning anything. 

  • Both types of loans can help you consolidate credit card debt or cover a large expense. 

When you’re ready to tackle a large financial goal, it’s nice to have options. As a homeowner, you’re in the driver’s seat. You can choose from several ways to get the results you want. Your options include home equity loans and personal loans—both have their place in a smart financial plan. All you need is the information to help you make the best choice.

Here you go.

How are a home equity loan and a personal loan similar? 

Personal loans and home equity loans are types of installment loans. During the repayment period, you’ll make equal monthly payments until you pay off your loan. 

Both kinds of loans usually have fixed interest rates. In other words, the interest rate is locked in and won't change during the life of the loan. 

A third similarity is that both kinds of loans give you a lot of flexibility in how you use the money. 

Either loan can help you reach big financial goals, like paying off your high-interest credit cards. If your debts make you feel like you’re pushing a rock uphill, a home equity loan or personal loan can help relieve some of that stress.  

Both kinds of loans can also be used to:  

  • Replace all of your kitchen appliances

  • Upgrade to a smart home

  • Grow your family through fertility or adoption

  • Pay for dental work 

  • Cover an emergency car repair

  • Renovate your kitchen

  • Pay unexpected medical bills

  • Replace your roof

  • [Insert your financial priority here]

Whether you need cash for life’s curveballs or for a planned expense, personal loans and home equity loans can both be great funding options. 

What's the difference between a home equity loan and a personal loan?

Here are a few key differences between home equity loans and personal loans.

Secured versus unsecured loans

A major difference is that you need to be a homeowner to get a home equity loan. A home equity loan is a type of mortgage. It’s a secured loan—you're borrowing against your home. Because you’re using your home as collateral, this lowers the risk for the lender. Secured loans usually cost less than comparable unsecured loans. 

Most personal loans are unsecured. That means that you don't have to offer anything of value (like your home or car) to get the loan. 

Interest rates

A home equity loan usually has lower interest rates than a personal loan because lenders charge less when they take on less risk. Being backed by your home makes the home equity loan a lower risk to the lender compared to a personal loan.

Personal loans tend to have interest rates a little higher than home equity loans, but lower than credit cards. 

Not all personal loans are more expensive than home equity loans. The loan rate you qualify for will depend on your credit score and financial details. Generally speaking, the higher your credit score, the lower your interest rate will be.

For either loan type, you should ask your lender if there is a way to get an interest rate discount. 

Maximum loan amounts 

The amount you can borrow through a personal loan depends on the lender, your credit standing, your income, and your other debts. Generally, you can borrow anywhere from a few thousand dollars to $50,000 with a personal loan. 

The amount you can borrow through a home equity loan depends on the lender, your credit, and the equity in your home. Home equity loans have higher loan limits than personal loans. Lenders typically let you borrow up to 85% of your home's value, which includes your primary mortgage if you have one. 

Time to fund

Personal loans are the clear winners when it comes to faster processing times for a loan. Some lenders offer funding within 24 hours of loan approval. If you're in a financial pinch and need the money sooner than later, a personal loan could get you the cash as soon as the next day. 

You can expect a home equity loan to take at least ten days. That’s because of ‌additional requirements, such as a home appraisal and a title search.

Time to repay 

Personal loans have shorter repayment terms than home equity loans—think 2 to 5 years. When you choose your repayment term, you might find that you can lower the interest rate by opting for a shorter term.  

Home equity loans have longer repayment terms. Think 10 to 15 years. Some home equity loans give you more years to pay, but keep in mind that when you take longer to pay, you pay more in interest. 

What’s better, a home equity loan or a personal loan?

As with most things in life, there's no one-size-fits-all answer. Rather, it's based on your situation, needs, and preferences. 

A home equity loan and a personal loan each come with their own advantages.

Home equity loan

Personal loan

Interest rate

Usually lower

Usually higher

Loan amount

Usually higher

Usually lower

Monthly payment

Usually lower

Usually higher

Credit score 

Usually lower

Usually higher

Time to fund

Average 15 days

Usually faster

Use of funds

Few restrictions

Few restrictions

Potential tax benefit




Typically 2% to 6% of the loan amount 

Typically 1% to 5% of the loan amount 

Achieve personal loan vs the Achieve home equity loan

The Achieve personal loan and home equity loan are unlike other options you may find from other lenders. Here’s what makes Achieve stand out.

Achieve personal loan

You can use a fixed-rate Achieve personal loan for just about any expense, including debt consolidation and large purchases. Borrow up to $50,000 with a repayment term of up to five years. Achieve offers several ways to get a permanent discount off your interest rate:

  • Apply with a qualified co-applicant

  • Allow Achieve to send the funds straight to your creditors when consolidating debt

  • Show proof of retirement savings (not used as collateral)

Achieve home equity loan

The Achieve home equity loan combines the best features of a home equity loan and a home equity line of credit (HELOC). You get a fixed interest rate, which protects you from fluctuating interest rates in the future. But you don’t have to take the entire loan in one lump sum. You get a five-year draw period when you can borrow, repay, and borrow more as often as you like, up to your credit limit. That’s helpful if you don’t need all of the money right away or you don’t know exactly how much you’ll need. 

Understanding the differences between a home equity loan and a personal loan is the first step toward a smart decision that'll get you closer to your next financial goal. If you would like more help, call us at 1-800-920-0045, or apply online and an Achieve expert can walk you through the options. Let’s do this together.

Jackie Lam - Author

Jackie is an Achieve contributor. She is an accredited financial coach (AFC®) who has written for Business Insider, BuzzFeed, CNET, USA Today's Blueprint, and others. She coaches artists and freelancers.

kim rotter 2022 2

Kimberly is Achieve’s senior editor. She is a financial counselor accredited by the Association for Financial Counseling & Planning Education®, and a mortgage expert for The Motley Fool. She owns and manages a 350-writer content agency.

Frequently asked questions

Personal loans are usually unsecured, which means you qualify based on your creditworthiness alone and don’t have to own anything. Because there is no asset tied to the loan, personal loans sometimes cost a little more than comparable secured loans like home equity loans. However, not all personal loans cost more than home equity loans. Your cost will depend on your credit score and your financial situation.

A traditional HELOC usually comes with a variable interest rate, which makes your cost of borrowing unpredictable. If you want the convenience of being able to borrow only as much as you need, up to your limit, for a few years, a fixed-rate HELOC is a better option. A fixed interest rate protects you from interest rate fluctuations in the future.

You have to be a homeowner to get a home equity loan. Personal loan approval is based on your creditworthiness while getting approved for a home equity loan depends on how much equity you have in your home. Your equity is your home’s value minus the amount you owe on your mortgage if you have one.

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