A HELOC uses your home equity as collateral — lower rate (7–10%) but your home is at risk. A personal loan is unsecured — higher rate (7–36%) but no collateral. For large home improvements, a HELOC usually wins on cost. For smaller amounts or when you don't want to put your home at risk, a personal loan wins.
Banks, credit unions, and mortgage lenders
Draw against your home equity at a low rate — but your home secures the debt.
Pros
Online lenders, banks, and credit unions
No home equity needed — fixed rate, no collateral, faster approval.
Pros
Pick HELOC (Home Equity Line of Credit) if: Homeowners with 20%+ equity doing large home improvements ($20K+) who can accept the risk of pledging their home.
Pick Personal Loan (Unsecured) if: Borrowers without home equity, or homeowners who don't want to put their home at risk for a smaller or medium-sized loan.
Explore home equity options →Check personal loan rates →
A HELOC makes sense when you have substantial home equity (20%+ after existing mortgage), need a large amount ($20K+), plan to draw funds over time rather than all at once, and are doing home improvement where interest may be tax-deductible (consult a tax advisor; IRS Publication 936 at irs.gov). The rate advantage (7–11% vs 7–36%) is meaningful at high balances. If the project is under $15K, the rate savings rarely justify the closing costs and the risk of securing the debt against your home.
Most lenders require a 680–720+ FICO and a combined loan-to-value (CLTV) ratio of 80–85% or lower — meaning you must retain 15–20% equity after the HELOC is drawn. Lenders calculate CLTV as: (existing mortgage balance + HELOC limit) ÷ appraised home value. If your home is worth $400K and you owe $250K, your maximum HELOC is roughly $90K at 85% CLTV. Federal Reserve data on home equity lending is available at federalreserve.gov.
HELOC interest may be tax-deductible when the proceeds are used to buy, build, or substantially improve the home securing the loan. It is generally NOT deductible for debt consolidation, medical bills, or other personal expenses — a rule clarified under the 2017 Tax Cuts and Jobs Act. The IRS covers the rules in Publication 936 at irs.gov. Always consult a qualified tax advisor for your specific situation; a platform like ClearValue Lending does not provide tax advice.
A HELOC typically takes 2–6 weeks from application to funded draw — it requires a home appraisal, title work, and a closing similar to a mortgage. A personal loan from an online lender can fund in 1–3 business days. For time-sensitive needs under $50K, a personal loan is almost always faster. For large, long-horizon projects where you'll draw repeatedly over months, the HELOC's 10-year revolving draw period and lower rate justify the longer origination timeline.
Independent editorial comparison. ClearValue Lending is not the issuer of any product compared here; affiliate links may pay a referral commission at no cost to you — selection is independent of compensation.