Is a home equity loan or personal loan better?

A home equity loan isn’t always the better option and vice versa. For some borrowers, a personal loan might be better, and for others, a home equity loan might be the best choice. It mainly depends on your personal situation. For example, if you have equity you want to use, a home equity loan can help you convert it into cash. However, a personal loan could be better if you have good credit, a steady income, and don’t want to use your home as collateral.

What is the main difference between a home equity loan and personal loan?

The primary difference between a home equity loan and personal loan is that a home equity loan is secured while a personal loan is unsecured, meaning the borrower doesn’t need to use their home to secure the loan. But keep in mind, because a personal loan is unsecured, they may come with higher annual percentage rates (APR) .

Can I use a home equity loan for personal reasons?

Yes, you can use the funds from your home equity loan for almost any reason. You can pay for a home improvement project, fund a vacation, or pay off debt. Just make sure you can repay the loan before using this form of financing.

Home Equity Loan Vs. Personal Loan: A Guide