Personal Loan vs. Home Equity Loan: Which Is Right for You?

Key takeaways

Personal loans are often a strong fit for smaller expenses, emergencies, and borrowers still building equity.
Home equity loans use your home as collateral to unlock lower rates and higher loan amounts, but they require sufficient equity, a stronger credit profile, and a longer approval timeline.
The decision comes down to your credit score, equity position, urgency, and loan size.

Comparing personal loans to home equity loans comes down to a few key variables: Personal loans fund quickly, require no collateral, and are available to all types of borrowers. Home equity loans can offer lower rates and higher loan amounts, but only if you have sufficient equity as a homeowner, strong credit, and time to wait through a longer approval process.

Choosing the right option comes down to your credit profile, your equity position, and how quickly you need the money.

Personal Loan vs. Home Equity Loan: Key Differences

The core differences between personal loans and home equity loans come down to collateral, cost, and speed. Here’s how they compare across the factors that matter most.

Feature	Personal Loan	Home Equity Loan
Collateral required	None	Your home
Typical loan amounts	$1,000–$100,000+	$10,000–$500,000+
Average APR	~9%–13% (24-month bank rate)	~7%–9% (5- to 10-year terms)
Approval timeline	Often 1–3 business days	Typically 2–6 weeks
Equity required	None	Usually 15–20% remaining after borrowing
Foreclosure risk	No	Yes; your home secures the loan

Source: Federal Reserve G.19; Bankrate

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

What Is a Personal Loan?

A personal loan is an installment loan, typically unsecured, that delivers a fixed lump sum repaid in equal monthly payments over a set term, typically 2–7 years.

Key facts of personal loans include:

Typically no collateral required. Approval is based primarily on credit score, income, and debt-to-income ratio (DTI).
Loan amounts typically range from $1,000 to $100,000, depending on the lender and your credit profile.
Terms generally run 2–7 years with fixed monthly payments throughout.
Funds may arrive within 1–3 business days of approval for many borrowers.
May be used for a wide range of purposes, including home improvement, medical bills, debt consolidation, or major purchases.

According to Federal Reserve G.19 data, average rates on a 24-month personal loan at commercial banks have recently run roughly 9% to 13%.

What Is a Home Equity Loan?

A home equity loan may allow you to borrow against the equity in your home, using it as collateral. It typically has a fixed interest rate and disburses as a lump sum. If you cannot make payments, the lender may foreclose on your home.

Key facts of home equity loans include:

Secured by your home: your equity serves as collateral.
Lump-sum disbursement with a fixed rate and fixed term, typically 5–30 years.
Requires that you retain at least 15–20% equity after borrowing (generally an 80% loan-to-value ratio or better).
Approval involves a home appraisal, title work, and underwriting; the process typically takes 2–6 weeks.
Average rates for home equity loans have recently run roughly 7% to 9% for 5- to 10-year terms.

One important distinction between a home equity loan and a home equity line of credit (HELOC): a home equity loan delivers a fixed lump sum at a fixed rate, while a HELOC is a revolving credit line with an often variable rate.

How Is a HELOC Different From a Home Equity Loan?

A home equity line of credit (HELOC) also uses your home as collateral, but works more like a credit card: you draw from a revolving credit line during a set draw period, then repay over a repayment period. Unlike a home equity loan’s fixed lump sum and fixed rate, a HELOC typically has a variable rate and flexible withdrawal amounts.

Personal Loan vs. Home Equity Loan: Which Is Easier to Qualify For?

Personal loans have a lower barrier to entry on most fronts, but the gap varies depending on which factor you’re looking at. Here’s how the two products compare across the variables that typically determine approval.

Credit score

Personal loans: Many lenders accept scores starting around 580, though you’ll typically need a score of 700 or more to qualify for the best personal loan interest rates, according to Experian.
Home equity loans: Most lenders require a minimum score of around 620, with the most competitive rates generally reserved for borrowers at 700 or above, according to Chase Bank.

Equity

Personal loans: Typically none is required.
Home equity loans: You typically need to retain 15–20% equity after borrowing, meaning your combined loan-to-value ratio generally can’t exceed 80%.

Income and DTI

Personal loans: Proof of income required. Lenders consider DTI, though thresholds vary widely and there is no universal ceiling the way there is with secured products.
Home equity loans: Proof of income required. Lenders commonly look for a DTI below 43–50%, and the equity requirement adds an additional layer that personal loans don’t have.

Documentation and timeline

Personal loans: Often funded within 1–3 business days, with less documentation.
Home equity loans: Require a home appraisal, title search, and full underwriting — a process that typically takes 2–6 weeks.

One additional factor: some lending platforms use underwriting models that evaluate a broader range of signals beyond credit score alone, which may improve access for borrowers whose credit file doesn’t tell the full story.

When Does a Personal Loan Make More Sense?

A personal loan is the stronger fit in four specific situations. In some cases, it may be the only option available.

Home improvement from $1K to $50K

For mid-range home improvement projects, a personal loan can be a more practical fit. Funding arrives in days rather than weeks, there’s no equity at risk, and for loan amounts in this range the rate difference versus a home equity loan may not be significant enough to justify the longer approval process or the collateral exposure. See our guide to using a personal loan for home improvement.

Emergency expenses

When timing matters, personal loans have a clear edge. They may fund within 1–3 business days, while a home equity loan may take several weeks to close. If a medical bill, car repair, or other urgent expense can’t wait, the speed of a personal loan is a significant advantage.

Credit uncertainty or rebuilding

Personal loan lenders may accept credit scores starting around 580, which is generally below the typical floor for home equity loan approval. For borrowers still rebuilding credit, a personal loan may be the more accessible option, though interest rates will reflect the elevated risk at lower credit scores.

You don’t own a home or have limited equity

A home equity loan simply isn’t available if you don’t own a home or have built meaningful equity in one. For renters and recent buyers, a personal loan is the direct path.

When Does a Home Equity Loan Make More Sense?

Because a home equity loan is secured by your home, missed payments can lead to foreclosure, making it best suited for borrowers with stable income and a clear repayment plan. A home equity loan earns its place in four specific situations: all of them involving substantial equity, a larger expense, or both.

Large renovation ($50,000 or more)

Home equity loans typically allow for higher loan amounts than most personal loans, and at meaningfully lower rates. At this scale, even a few percentage points of rate difference compounds significantly over a 10- or 15-year repayment period. If you have sufficient equity and are planning a major kitchen remodel, addition, or full renovation, a home equity loan may produce meaningful savings versus unsecured financing.

Substantial equity and stable income

Borrowers with significant equity and steady employment are in the strongest position to use a home equity loan responsibly: the lower rate is accessible, and the collateral risk is manageable given the financial cushion in place.

Long repayment horizon for a large expense

Home equity loans can extend to 20–30 years, which lowers monthly payments considerably for very large projects compared to a personal loan’s typical 2–7 year term. If you’re financing $50,000 or more and need the monthly payment to fit a tighter budget, the extended term of a home equity loan may be necessary.

Note: With any home equity product, missed payments can lead to foreclosure. If you cannot pay back a home equity loan, the lender could foreclose on your home. Before using your home as collateral to consolidate unsecured debt, consider consulting a credit counselor to weigh your options.

How Upstart Can Help You Find the Right Financing

Upstart is an AI-powered lending platform that connects borrowers with lending partners, and it’s one of the few places where you can explore both options in one place.

For borrowers considering an unsecured option, you can check your rate for a loan through Upstart — loans from $1,000 to $75,000⁵ with no collateral required⁴. The platform uses an AI-driven underwriting model that evaluates more than just credit score, which can expand access for borrowers with a thin or mixed credit file.

For homeowners with equity who want a flexible credit line, a HELOC through Upstart Home Lending offers $26,000–$250,000 with a fully online process and no appraisal required for nearly all applicants. You can check your rate with no impact to your credit score¹ in either case.

Frequently Asked Questions

What credit score do you need for a personal loan vs. a home equity loan?

Personal loans typically accept credit scores starting around 580, while home equity loans generally require a minimum score of 620. In both cases, a higher score expands your options and lowers your cost.

Is a personal loan or home equity loan better for home improvement?

For projects in the $1,000 to $50,000 range, a personal loan is often the faster and simpler choice; for larger expenses over $50,000 where you have sufficient equity, a home equity loan may offer a meaningfully lower rate. See more in our guide to personal loans for home improvement.

What happens if I can’t repay a home equity loan?

If you cannot pay back a home equity loan, the lender could foreclose on your home. This is the key risk of secured borrowing: what makes the rate lower is that your home is on the line. If there’s meaningful uncertainty about your ability to repay, an unsecured personal loan carries less severe consequences for default.

How fast can I get funds from a personal loan vs. a home equity loan?

Personal loans are commonly funded within 1–3 business days of approval. Home equity loans involve an appraisal, title work, and underwriting, a process that typically takes 2–6 weeks. If timing is a factor, the difference is significant.

Can I get a home equity loan with fair credit or limited equity?

Both work against you with a home equity loan. Most lenders require a credit score of at least 620, and you typically need to retain 15–20% equity after borrowing. If your credit score is in the mid-600s or lower, or if you’ve built limited equity, qualifying for a home equity loan may be difficult, and a personal loan is likely the more accessible path. You can learn more about what credit score is needed for a personal loan here.

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.