HELOC vs. Personal Loan: Which One is Better for You?

Key takeaways

A HELOC is a secured line of credit that typically offers lower interest rates but requires home equity
A personal loan is unsecured, requires no collateral, and can fund in as little as one business day.
The right choice often depends on three key factors: how much usable equity you have, your credit score tier, and how soon you need the funds.

A HELOC and a personal loan both let you borrow a large sum to cover a major expense, just in two different ways. A HELOC, or home equity line of credit, borrows against your home, earning you a lower rate. A personal loan borrows with no collateral at all, funding faster and keeping your home out of it.

Choosing between a home equity line of credit and a personal loan comes down to your situation and financial needs.

Here is a quick overview of how the two financing options compare:

HELOC vs. Personal Loan: A Comparison

Category	HELOC	Personal Loan
Collateral required	Your home equity secures the line	Not typically required
Typical APR range	~6.50% – 10.50% APR	~8.00% – 24.00% APR
Loan or line amount	Typically $26,000 to $250,000	Typically $1,000 to $75,000
Funding speed	About 30 to 40 days at traditional banks; as fast as a few days through some online lenders	Same day to about one week
Origination fee	Varies by lenders, typically 0-2%	Varies by lender, often 1% to 8%
Risk if you default	Your home can be foreclosed on	No collateral to lose; credit damage only

Note:Rates and fees vary by lender, credit profile, and equity position. Treat this as a starting framework, not a final quote.

A HELOC typically offers lower variable rates and may suit borrowers who have home equity, need a large or phased amount, and can wait several weeks for funding.

Upstart Home Lending, for example, offers HELOC APRs starting as low as 6.52%11, and backs it with a lowest rate guarantee: if you’re approved by Upstart Home Lending but receive a lower rate somewhere else, Upstart Home Lending will send you a $200 gift card16.

A personal loan requires no collateral⁴, carries a fixed rate, and can fund within a day to a week, which can make it a better fit for urgent needs or borrowers without equity. Loans through Upstart, for example, offer APRs from 6.2% to 35.99%, with 3- or 5-year terms⁷.

The right choice depends on your equity, credit profile, and timeline.

How a HELOC Works

A HELOC is a revolving line of credit secured by your home, which means you can borrow, repay, and borrow again up to your approved limit, much like a credit card. That revolving structure is also what separates it from a lump-sum loan, as our comparison of HELOCs and home equity loans explains.

Most HELOCs run in two phases:
1) The draw period lasts up to 10 years, and many lenders may allow interest-only payments during that window.
2) The repayment period that follows typically runs 10 to 20 years, when you pay down principal plus interest.

Because a HELOC is secured by your home, defaulting could result in foreclosure. The lower rate comes in exchange for putting your property up as collateral, which is the single most important tradeoff to understand before you borrow.

Pros and Cons of a HELOC

Pros	Cons
Lower rates than unsecured options, because the line is secured	Your home is collateral, so default could lead to foreclosure
Draw only what you need, when you need it	Rates are variable and can rise over time
Interest-only payments are often allowed during the draw period	Approval and closing can take weeks
Interest may be deductible when funds substantially improve the home	Requires sufficient home equity to qualify
Reusable credit line as you repay	Origination or closing costs may apply

How a Personal Loan Works

A personal loan is a lump sum disbursed up front and repaid in fixed monthly installments over a term that usually runs one to seven years. Most personal loans typically don’t require collateral and have no draw period; the money arrives, and repayment begins right away. The rate is fixed at origination, so your payment stays the same for the life of the loan.

Pros and Cons of a Personal Loan

Pros	Cons
No collateral, so your home is not at risk	Rates are typically higher than a HELOC
Fixed rate and fixed payment for predictable budgeting	You receive a lump sum, not a flexible line
Fast funding, often within days	Interest is not tax deductible
Available to renters and recent buyers with no equity	Origination fees can be steep with some lenders
AI-driven underwriting may widen access	Shorter terms can mean higher monthly payments

HELOC vs. Personal Loans: Which Is Better for Your Project?

Which option is better for your project depends on your equity, credit score, and timeline.

Home renovation

For a renovation, a HELOC’s revolving structure lets you draw funds in stages as the project’s scope and costs evolve, rather than borrowing a fixed sum up front. If the work qualifies as a substantial improvement to the home, the interest may also be deductible. For smaller or fixed-scope projects, a personal loan can still be the simpler choice.

Debt consolidation

When the goal is consolidating high-interest debt, a personal loan keeps your home out of the equation and gives you a fixed payment you can plan around. A HELOC can also consolidate debt at a lower rate, but it converts unsecured balances into debt secured by your home, which raises the stakes if you fall behind.

Emergency expense

For an urgent or time-sensitive expense, speed is the deciding factor, and a personal loan’s same-day-to-one-week funding usually beats a HELOC’s closing timeline. That holds even when the HELOC would be cheaper, because the money simply arrives sooner.

Large one-time purchase

For a large purchase financed over several years, the HELOC’s lower rate may compound into meaningful savings depending on your credit profile and loan terms, which can justify the longer setup. The bigger and longer the balance, the more that rate gap matters.

Use the decision guide below to match your equity, credit, and timeline situation to the right option.

Use Case	Recommended Option	Key Reason
Home improvement or renovation ($25K+)	HELOC	Draw flexibility as scope grows; interest may be deductible
Debt consolidation	Personal loan	No home at risk; fixed payments are more predictable
Emergency or urgent expense	Personal loan	Funds in days, not weeks
Large one-time purchase ($30K+, multi-year)	HELOC	Rate advantage is meaningful at scale

Note: Examples are for illustration only. Actual rate, term, and savings will vary based on your credit profile and lender.

HELOC vs. Personal Loan: Which Should You Choose?

In addition to your goals, there are also other variables you should consider:

Decision Variable 1: How Much Home Equity Do You Have?

Most HELOC requirements let you borrow up to 80 to 85 percent of your home’s value, minus what you still owe, and lenders generally want you to keep at least 15 percent equity.

Here is the math for one example: if your home is worth $300,000 and you owe $200,000, an 85 percent limit gives you $255,000 minus the $200,000 you owe, leaving about $55,000 as your maximum HELOC.

If you have 20 percent or more usable equity and need $30,000 or more, a HELOC may offer a meaningfully lower rate. But if you bought recently, put less than 20 percent down, or are in a market where values have softened, you may not have enough equity to qualify, and that can settle the decision before you even compare rates.

Decision Variable 2: What Is Your Credit Score Tier?

If your score is 750 or higher, both products are open to you, and the HELOC’s rate advantage is usually at its widest. The lowest HELOC rates go to the strongest profiles; through Upstart Home Lending, for example, the best advertised rate is reserved for a FICO score of 780 or above.

With a score in the range of 670 to 749, a HELOC is still accessible at most lenders. Many set a minimum in the low-to-mid 600s, and some go lower; Upstart Home Lending, for instance, considers applicants starting at 600. Personal loan rates at this tier run higher but remain competitive, and the HELOC rate advantage may still exist, though it narrows.

In the range of 580 to 669, HELOC qualification gets harder, as many lenders look for mid-600s, and some decline below 640. This is where the difference between secured vs. unsecured loans matters most.

Decision Variable 3: How Soon Do You Need the Money?

On speed, a personal loan is often the faster option for most borrowers, and the margin is wide. Online personal loan lenders can fund anywhere from the same day to about a week after approval. A HELOC takes longer because it involves a property valuation and a formal closing.

Traditional banks commonly need 30 to 40 days, though timelines have compressed at some online lenders; Upstart Home Lending reported that 10 percent of its funded HELOCs closed in as fast as two days as of April 2026, with those loans funding within seven days⁶.

For the full picture, see how long it takes to get a HELOC. Keep in mind the federal three-day right of rescission that applies after a HELOC closes, before funds release.

If you need money in under two weeks and have not already started a HELOC application, a personal loan is almost certainly the faster path.

Decision Variable 4: How Much Will It Actually Cost?

HELOC is typically cost less because it’s secured by your home.

The table below compares a $30,000 borrowing need over five years at current national averages.

	HELOC	Personal Loan
Example rate	~8.5%	~11.40%
Monthly payment	~$600	~$658
Total paid (5 years)	~$36,000	~$39,500
Savings with HELOC	~$57/month · ~$3,400 total	—

Note: Examples are for illustration only. Actual rate, term, and savings will vary based on your credit profile and lender.

What can affect your total savings:

Origination fee: Most HELOC lenders charge a fee to open the line. A fee paid upfront reduces your saving in the example above — though Upstart Home Lending charges no annual fee, prepayment penalty, or redraw fee once your line is open12.

Variable rate risk: Most HELOC rates are variable and can rise. If the rate rose to 9%, the monthly payment on this example would increase by roughly $25. Some lenders let you lock a fixed rate on each individual draw, which limits this risk for funds you’ve already drawn.

How to Decide Between a HELOC and a Personal Loan

There is no universal best option, and the right financing choice depends on your individual needs, credit profile, and financial situation.

Strong equity, good credit: HELOC is typically better

If you have 20 percent or more equity, a credit score around 700 or above, and at least three weeks before your project starts, a HELOC may offer the lower total cost and greater borrowing capacity, since the rate advantage and draw flexibility pay off when you have both the equity and the time to use them.

Urgent need: personal loan is typically faster

If you need funds in under two weeks, regardless of your equity or credit, a personal loan is the faster path, because speed outweighs the HELOC’s rate advantage.

Fair credit score: personal loan may be more accessible

If you have equity but a fair credit score in the 580 to 660 range, HELOC qualification may be harder. A personal loan through a lending platform that uses AI-driven underwriting may provide a more accessible path, without putting your home at risk.

No home equity: a personal loan is still an option

If you have no home equity, whether because you bought recently, made a minimal down payment, or your local market has softened, a HELOC is simply not available, and a personal loan is the unsecured option that does not depend on equity at all.

Find funding options that works for you

If you have decided a HELOC fits your situation, a HELOC through Upstart Home Lending may be worth considering. If a personal loan fits better you can check personal loans through Upstart. For either option, checking your rate starts with a soft credit inquiry that does not affect your credit score¹, and a full application later involves a hard inquiry.

Frequently Asked Questions

Is a HELOC or personal loan better for home improvement?

Neither is automatically better. A HELOC suits larger or phased renovations where you have equity and may carry a lower rate, while a personal loan funds faster and keeps your home out of it for smaller or urgent projects. HELOC interest may be deductible when funds substantially improve the home; personal loan interest is not, so consult a tax advisor.

What credit score do you need to qualify for a HELOC vs. a personal loan?

HELOCs generally require a higher score, often mid-600s or above, with the best rates reserved for the high-700s. Personal loan requirements tend to be more flexible, and some lending platforms use AI-driven underwriting that weighs income, employment, and education² alongside your score.

Can you lose your home if you default on a HELOC?

Yes. Because a HELOC is secured by your home, defaulting could result in foreclosure, whereas an unsecured personal loan cannot cost you your home, though default still damages your credit.

How fast can you get a personal loan vs. a HELOC?

A personal loan is usually faster, often funding within a day to a week, while a HELOC’s valuation and closing process commonly takes 30 to 40 days at traditional banks. If you need money within about two weeks, a personal loan is typically the quicker route.

Is HELOC interest tax deductible?

Sometimes. HELOC interest may be deductible only when the funds are used to buy, build, or substantially improve the home that secures the line, and only if you itemize; consult a tax advisor.

Which has lower interest rates: a HELOC or a personal loan?

HELOCs typically carry lower rates because they are secured by your home. That rate gap can narrow or widen depending on your credit score, equity position, and the specific lender, so comparing actual offers for your profile is the most reliable way to assess the cost difference.Those rates are usually variable and can rise, while personal loan rates are generally fixed for the life of the loan.

Can I get a personal loan if I do not have home equity?

Yes. A personal loan is unsecured and requires no equity or collateral, and you can check your potential rate with a soft inquiry that does not affect your credit score before applying.

Upstart Network, Inc. (NMLS #936133) is not a lender. All loans on its marketplace are made by regulated financial institutions.

All mortgage lending is conducted by Upstart Mortgage, LLC dba Upstart Home Lending. (NMLS #2443873). Equal Housing Opportunity.

Checking your rate won’t affect your credit score: When you check your rate, we check your credit report. This initial (soft) inquiry will not affect your credit score. If you accept your rate and proceed with your application, we do another (hard) credit inquiry that will impact your credit score. If you take out a loan, repayment information may be reported to the credit bureaus.
Upstart’s model considers education: Neither Upstart nor its lending partners have a minimum educational attainment requirement in order to be eligible for a loan.
41% more approvals and 33% lower rates than a traditional model: As of publication in April 2026, and based on a comparison between the Upstart model and a hypothetical traditional model using Upstart data from Jan – Dec 2025. For more information on the methodology behind this study, please see Upstart’s Annual Access to Credit results here.
Unsecured Loans: While most loans through Upstart are unsecured, certain lenders may place a lien on other accounts you hold with the same institution. There may be an option to secure your personal loan through Upstart with your vehicle, which will require a lien to be placed on the vehicle. It is important to review your promissory note for these details before accepting your loan.
Loan amounts from $1,000 -$75,000: Your loan amount will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will qualify for the full amount. Minimum loan amounts vary by state: GA ($3,100), HI ($1,500), MA ($7,000). Maximum loan amounts may vary by state.
Closing and funding timeline: In April 2026, 10% of funded HELOCs achieved a closing timeline of 2 days or less and a funding timeline of 7 days or less. This timeline assumes consumers close with our remote online notary, provide supporting documentation promptly, and ensure the information provided is accurate and consistent with our verification process. Delays, discrepancies, and other unforeseen factors may impact the closing timeline. MBA’s 2025 Home Lending Study reports an average industry closing time of 37 days.
APRs from 6.2% – 35.99%, with 3 or 5 year terms: The full range of available rates varies by state. The lowest rates are only available to the most qualified applicants. A representative example of payment terms for an unsecured Personal Loan is as follows: a borrower receives a loan of $10,000 for a term of 60 months, with an interest rate of 17.50% and a 7.25% origination fee of $725, for an APR of 21.23%. In this example, the borrower will receive $9275 and will make 60 monthly payments of $252. APR is calculated based on 5-year rates offered in March 2026. There is no downpayment and no prepayment penalty. Your APR will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will be approved.
Instant deposits: To receive instant funding, your bank account must support instant transfers. If your account does not support instant transfers, funds will be available to you depending on your bank’s transaction processing time and policies.
Always On Commitment: We are committed to maintaining your credit limit as long as you continue to meet program eligibility and account requirements. To ensure the safety and security of all our members, we reserve the right to adjust or close lines in specific circumstances, including account default or late payments, suspected fraud, violation of our terms of service (including abusive behavior), or when necessitated by legal or regulatory requirements.
Cash Line draws: You may request a draw at any time. Only one draw may be outstanding at a time; after it is fully repaid, you may request another.
HELOC APRs as low as 6.52%: Terms shown here are subject to change without notice. APRs for initial advances range from 6.52% to 18.00% based on rates offered as of April 2026. The lowest rate is only available to consumers willing to become a member of a credit union and to those who meet a minimum FICO score of 780, CLTV under 70%, and DTI under 45%. Your actual rate will depend on many factors such as your credit history, combined loan-to-value ratio (CLTV), line amount, loan term, lien position, and property state. Origination fee to open an account is between 0% and 4.99% of the approved credit limit. The Annual Percentage Rate (“APR”) is variable and based on the Prime Rate as published in the Wall Street Journal “Money Rates” table plus or minus a margin. Your APR will never be less than 3.99% or greater than 18.00%. Property insurance is required.
No annual fee, prepayment penalty, or fees to redraw: Terms shown here are subject to change without notice. Origination fee to open an account is between 0% and 4.99% of the approved credit limit. The Annual Percentage Rate (“APR”) is variable and based on the Prime Rate as published in the Wall Street Journal “Money Rates” table plus or minus a margin. Your APR will never be less than 3.99% or greater than 18.00%. Property insurance is required.
2,500+ Variables:As of 3/31/2026. “Variables,” often also referred to as “features,” refers to raw variables and combined variables considered in our AI models. A “raw” variable is a non-combined, conceptually distinct unit of data, such as “applicant-reported savings.” A “combined” variable is data that has been transformed, combined, or otherwise engineered from a raw variable or set of raw variables, such as “applicant-reported savings” divided by “loan amount.
Fully automated loans: In Q2 2026. Percentage of Loans Fully Automated, which is defined as the total number of loans in a given period originated end-to-end (from initial rate request to final funding for personal loans and small dollar loans, and from initial rate request to signing of the loan agreement for auto loans) with no human involvement required by the Company divided by the Transaction Volume, Number of Loans in the same period.