Home Equity Loans vs Personal Loans for Home Improvement

By Jason Ramin

There’s nothing more satisfying than successfully remodeling your kitchen or fixing the plumbing in the bathroom. When you get a new idea to improve your home and the end result is amazing, it’s perfectly natural to start looking for other ways to improve things.

Maybe you’ve caught the home makeover bug from all the TV shows out there about remodeling old homes and flipping them for a profit. Maybe your need is a little more legitimate and the home improvement projects that you’ve put on the back burner for whatever reason are now becoming more urgent.

Whether you’ve got the home improvement itch or a more serious situation that needs to be taken care of quickly, you’re likely going to need a home improvement loan to make the magic happen. There are two types of home improvement loans available to you, both with similarities and differences, but there are advantages and disadvantages and situations where one would make more sense to use than the other.

Types of Home Improvement Loans

The two types of home improvement loans available to you for home improvement projects—or at least the ones people use most often for home improvement projects—are home equity loans and personal loans.

Home Equity Loans

Home equity is the term used to describe the difference between the amount your property is worth and your current mortgage balance. When you apply for a home equity loan, you’re offering up that number (difference between property value and current mortgage balance) as collateral on the loan.

You can get your home equity loan in full upfront and then are responsible to pay it back over time. Your payment will often be set at a fixed rate. A home equity loan is a great option for home improvement loans, but different lenders will offer different rates. So it’s worth it to shop around a bit before committing to such a loan right away.

Personal Loans

Personal loans can be applied to just about any expense, including home improvement projects. A personal loan is usually unsecured, so it’s not propped up by collateral. You’ll receive the amount for the loan in a lump sum, which you’ll then pay back over time.

Personal loans are typically used to consolidate debt. For this reason, your credit score and payment history are given special attention and notice. If you’re solid and dependable when it comes to paying off your debts, you’re more likely to get a bigger loan.

Personal loans are easier than ever before to get. Many banks and other types of lenders offer them, including online lenders. Be wary of jumping right into getting this loan: check around and make sure the lender you’re going with is legitimate and won’t scam you.

Home Improvement Loan Options: Home Equity vs. Personal Loans

Let’s take a look at some of the similarities and differences as well as the advantages and disadvantages associated with both home equity loans and personal loans.


  • Both are loans that give you lump sums of money in advance that you then pay off over time at a fixed rate.
  • Both offer larger amounts of money than the borrower has on hand.


  • Home equity loans require collateral; personal loans don’t.
  • The repayment is different for both: home equity payments can go for typically 20-30 years, while personal loans are expected to be paid off faster; usually within 1-5 years.
  • Personal loans have a higher interest rate than home equity loans.
  • The amount you can get for each loan is slightly different: personal loans can be up to $100k; home equity loans can be as much as 80% of your home's value.

When to Use Home Equity Loans and the Advantages of Home Equity Loans

Consider getting a home equity loan if you have a significant amount of equity, are looking for tax deductible options, and are trying to borrow a large amount of money.

Some additional reasons/advantages of choosing a home equity loan include:

  • If you’ve got good equity in your home, you’re in a great position to get a good loan offer.
  • Home equity loans typically have a lower interest rate, which will really save you in the long-run as you pay off the loan over the years.
  • The amount of money you can get for a home equity loan can be huge; it just depends on the overall value of your home and your equity.

When to Use Personal Loans and the Advantages of Personal Loans

If you’re looking for quick results on your home improvement plans, if you’re a brand new homeowner, if the projects you’re looking to complete won’t cost as much, and if you have a great credit score, a personal loan might be the better option for you.

Here are some of the advantages of personal loans:

  • You don’t have to put your home or anything else up as collateral.
  • The process of getting a personal loan is often quick and easy with very little hassle.
  • Smaller amounts on loans equate to getting the money faster. offer loans for home improvement purposes. See if you qualify by submitting a loan request with us today if you are ready to start doing the home improvements you’ve always imagined!