When life’s big expenses come up — home renovations, college tuition, or unexpected bills — having access to flexible funding can make all the difference.
Two of the most popular ways to borrow are Home Equity Lines of Credit (HELOCs) and Personal Loans.
While both can help you achieve your goals, they work in very different ways. Understanding the differences between a HELOC vs. personal loan will help you choose the right fit for your financial situation.
A Home Equity Line of Credit, or HELOC, allows homeowners to borrow against the equity they’ve built in their homes. It works much like a credit card — you’re given a revolving line of credit that you can draw from as needed during the “draw period.”
Secured by your home’s equity
Revolving credit line — borrow, repay, and borrow again
Variable interest rates that adjust with the market
Pay interest only on what you use
Ideal for long-term or recurring expenses
Lower interest rates compared to unsecured loans
Flexibility to borrow as needed
Potential tax advantages when used for home improvements
Because a HELOC is secured by your home, responsible use is essential — missed payments could impact your property.
A personal loan is a fixed-term loan that gives you a lump sum of money upfront, which you repay in equal monthly installments over a set period, typically two to seven years.
Usually unsecured — no collateral required
Fixed interest rates and predictable monthly payments
Fast approval process and funding
Great for one-time expenses
No need for homeownership or equity
Simple, structured repayment plan
Useful for debt consolidation, home repairs, or emergencies
Because it’s unsecured, personal loan rates can be slightly higher than HELOCs — but they offer consistency and simplicity.
Understanding the difference between a HELOC and a personal loan comes down to flexibility, security, and repayment style.
| Feature | HELOC | Personal Loan |
|---|---|---|
| Collateral | Secured by home equity | Unsecured |
| Disbursement | Revolving credit line | One-time lump sum |
| Interest Type | Variable | Fixed |
| Use of Funds | Ongoing or long-term projects | One-time expenses |
| Risk | Your home acts as collateral | No collateral required |
If you need flexible access to funds over time, a HELOC might be ideal. If you want predictability and fixed payments, a personal loan could be a better fit.
Many homeowners also ask about the difference between a HELOC and a home equity loan.
A Home Equity Loan gives you a fixed lump sum upfront, with a fixed rate and payment schedule.
A HELOC provides a revolving line of credit you can draw from as needed, typically with variable rates.
Think of a home equity loan as a one-time disbursement, while a HELOC works more like a reusable credit line.
A HELOC may be right for you if you:
Own your home and have available equity
Want flexible access to funds for large or ongoing expenses
Are comfortable using your home as collateral
Prefer lower interest rates than unsecured loans
Common uses include:
Home improvements or renovations
Education expenses
Medical costs or emergencies
Long-term financial flexibility
A personal loan may be the better choice if you:
Need a specific amount for a defined purpose
Don’t want to use your home as collateral
Want predictable, fixed monthly payments
Need funds quickly for time-sensitive expenses
Typical uses include:
Debt consolidation
Large purchases
Home repairs
Major life events
A home equity loan and a home equity line of credit both use your home as collateral — but they function differently:
Home Equity Loan: Fixed amount, fixed rate, and fixed term.
HELOC: Revolving line with variable rates and flexible repayment.
If you want predictable payments, choose a home equity loan.
If you want flexibility, a HELOC may serve you better.
HELOC rates tend to be lower but variable, meaning your payment can change.
Personal loan rates are fixed, making budgeting easier.
The best option depends on your financial stability, credit profile, and comfort with risk.
Ask yourself:
Do I want flexible borrowing or fixed payments?
Am I comfortable using my home as collateral?
How long will I need access to funds?
If you need ongoing flexibility, a HELOC is often the better tool.
If you want simple, one-time financing, a personal loan might be the right fit.
A First Hope Bank representative can help you compare interest rates, terms, and your unique goals to determine the right borrowing solution.
Ready to explore your options? Whether you’re interested in a HELOC, a personal loan, or a home equity loan, our team is here to help.
Talk to a First Hope Bank representative today — visit your local branch, call our lending team, or send a message through our website. We’ll help you understand your options, compare interest rates, and find the right fit for your goals.
A HELOC gives you a revolving credit line secured by your home’s equity, while a personal loan provides a fixed lump sum without using collateral. A HELOC offers flexibility, while a personal loan offers predictability.
A HELOC is a separate line of credit in addition to your mortgage. It doesn’t change your mortgage terms but uses your home’s equity as collateral. You’ll make separate payments for each.
Yes. Many homeowners use a HELOC to consolidate higher-interest debts like credit cards. However, since your home is collateral, it’s important to make consistent payments to protect your property.
Interest on a HELOC may be tax-deductible if the funds are used for home improvements that add value to your property. Always consult a tax professional to confirm eligibility.
Choose a home equity loan if you want a fixed amount, fixed term, and predictable payments. Choose a HELOC if you want flexible access to funds over time with variable rates.
A personal loan doesn’t require homeownership or collateral. It’s typically faster to obtain and easier to manage, making it ideal for borrowers who prefer simplicity or need funds quickly.