Home equity loans offer lower rates because your home is collateral. Personal loans are faster and require no collateral, but carry higher rates. The decision hinges on how much you need, whether you own a home with equity, and whether you're comfortable putting that equity at risk.
Banks, credit unions, and home equity lenders
Secured lump sum at a low fixed rate — but your home is on the line.
Pros
Online lenders, banks, and credit unions
No collateral, faster funding — higher rate, but your home stays off the table.
Pros
Per-spec leads computed from published specs — no single overall winner. Reviewed 2026-07-14.
| Spec | Home Equity Loan | Personal Loan |
|---|---|---|
| Starting APR | 7–10% (2026) | 7–36% |
| Max amount | ◈ $10,000–$500,000+ | $1,000–$100,000 |
| Best for | Homeowners with substantial equity who need $25,000+ at the lowest possible rate and are comfortable using their home as collateral. | Borrowers who need $5,000–$50,000 quickly, don't want to put their home at risk, and have 640+ FICO to qualify for a competitive unsecured rate. |
◈ marks the stronger option for that row.
Pick Home Equity Loan if: Homeowners with substantial equity who need $25,000+ at the lowest possible rate and are comfortable using their home as collateral.
Pick Personal Loan if: Borrowers who need $5,000–$50,000 quickly, don't want to put their home at risk, and have 640+ FICO to qualify for a competitive unsecured rate.
Learn from the CFPB →Learn from the CFPB →
A home equity loan wins when: you own a home with meaningful equity; you need $25,000+ at the lowest possible rate; you have time for a 3–6 week closing process; and you're comfortable pledging equity. A personal loan wins when: you need funds in days; you don't own a home or have limited equity; your loan amount is under $25,000; or you're not comfortable using your home as collateral. Source: CFPB guidance at consumerfinance.gov.
It is harder — most lenders require 620–640 FICO for a home equity loan, though some credit unions go lower. Even with equity, lenders run full credit underwriting. For borrowers with damaged credit, a personal loan from a lender that specializes in fair-credit (e.g., Upstart, Avant) may be more accessible, though at a higher rate. Source: CFPB at consumerfinance.gov.
A home equity loan typically takes 3–6 weeks from application to funding — it requires an appraisal, title search, and full mortgage underwriting. A personal loan from an online lender typically takes 1–5 business days: same-day or next-day approval is common for straightforward files. If you need funds urgently, a personal loan wins on speed.
Yes, in several ways. Applying for a home equity loan triggers a hard credit inquiry, which can temporarily lower your score by a few points. Once the loan is open, it adds to your total debt balance and appears as an installment loan on your credit report. On-time payments build positive payment history; missed payments can significantly damage your credit. Because the loan is secured by your home, default carries foreclosure risk in addition to the credit damage. Source: CFPB at consumerfinance.gov.
Closing costs on a home equity loan (origination fees, appraisal, title) are generally not deductible in the year paid. However, points paid on a home equity loan may be deductible over the life of the loan if the proceeds are used to buy, build, or substantially improve the home securing the debt. Interest on the loan itself may be deductible under IRS Publication 936 rules if used for qualifying home improvement purposes. Consult a tax advisor for your specific situation; verify current rules at IRS Publication 936 at irs.gov.
Most lenders allow a combined loan-to-value (CLTV) of 80–85% for a home equity loan — meaning the total of your first mortgage plus the new home equity loan cannot exceed 80–85% of the home's appraised value. Some lenders go to 90% CLTV for well-qualified borrowers, but this is less common and typically carries a higher rate. The CFPB notes that exceeding 80% CLTV leaves less equity cushion if home values decline. Source: CFPB at consumerfinance.gov.
A home equity loan is a lump-sum installment loan at a fixed interest rate — you receive all funds at closing and repay in equal monthly payments. A home equity line of credit (HELOC) is a revolving credit line with a variable rate — you draw funds as needed during a draw period (typically 10 years), then repay during a repayment period. Home equity loans suit one-time large expenses (a renovation, debt consolidation); HELOCs suit ongoing or variable spending needs. Both use your home as collateral and carry foreclosure risk on default. Source: CFPB at consumerfinance.gov/consumer-tools/mortgages/.
When you sell your home, the home equity loan must be paid off at closing from the sale proceeds — along with your first mortgage — before you receive any equity. The buyer's title company ensures all liens are cleared at settlement. If the sale price isn't enough to cover both the first mortgage and the home equity loan, you'd need to bring cash to closing to cover the shortfall. This is rare when home values have appreciated, but it's the key risk of borrowing against equity in a declining market. Source: CFPB mortgage closing resources at consumerfinance.gov.
Yes, in specific situations. A personal loan avoids risking your home as collateral, so a default cannot lead to foreclosure. Personal loans also close in days vs 3–6 weeks for home equity loans. If you're borrowing a modest amount ($5,000–$30,000) or need funds quickly, the higher personal loan rate may be worth the trade-off in speed and security. For larger amounts where the rate difference is substantial, a home equity loan's lower rate often justifies the collateral risk and longer closing timeline. Evaluate both the rate spread and the total repayment cost. Source: CFPB at consumerfinance.gov.
Home equity loans typically require a minimum FICO score of 620–640, though many lenders prefer 700+ for the best rates and highest CLTV (combined loan-to-value) allowance. Personal loans are available across a wider credit spectrum — online lenders like Upstart and Avant serve borrowers with scores as low as 550–580, though at significantly higher rates. For borrowers with scores in the 600–700 range, both products may be accessible, but terms will differ substantially. Credit score requirements vary by lender; check your rate without a hard inquiry using prequalification tools at each lender's website. Source: CFPB at consumerfinance.gov.
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.