HELOC vs personal loan: what $25,000 and $60,000 cost at 8% vs 11.86%

8 min read · LenderMatch Learn

The main difference between a HELOC and a personal loan is collateral. A HELOC is a line of credit secured by your home, so it usually carries a lower rate, but falling behind can put the home at risk. A personal loan is unsecured: it typically costs more in interest, comes as a fixed-rate lump sum and can fund within days.

The gap in rates is real: commercial banks averaged 11.86% on 24-month personal loans in the second quarter of 2026, while HELOCs are priced off a 7.00% prime rate plus a margin. Below: the two side by side, the cost of borrowing $25,000 and $60,000 each way, and when each one wins. If a HELOC fits, comparing offers from several lenders is how you find your actual margin.

HELOC vs personal loan: the main differences

Sources listed at the end. Lender examples are published terms and can change.

Secured vs unsecured: why the rates differ

A HELOC is a second mortgage in most cases: the lender records a lien on your home, which is why it can lend at a lower rate (see is a HELOC a second mortgage). A personal loan has no collateral. One national bank’s personal loan page puts it plainly: “Personal loans are unsecured, which means there’s no collateral, like the equity you own in your car or house.”

That trade runs both ways. The lower HELOC rate is paid for with your home. The CFPB says that if you fall behind or can’t repay a HELOC on schedule, “you could lose your home.” Missing personal loan payments hurts your credit and your finances, but the house isn’t pledged.

HELOC vs personal loan rates

• Personal loans: commercial banks averaged 11.86% on 24-month personal loans in the second quarter of 2026, up from 11.36% in the first quarter (Federal Reserve G.19, released October 7, 2026). Your rate depends on your credit; one national bank lists fixed APRs from 6.74% to 26.74% as of July 10, 2026.
• HELOCs: most charge the prime rate plus a margin set by your credit and equity. Prime has been 7.00% since September 17, 2026; the prime rate page tracks it.

The HELOC rate moves with prime, so the gap can shrink or grow after you borrow. Regulation Z requires a variable-rate HELOC contract to state the maximum rate it can ever charge, so ask for that number. A personal loan’s fixed rate stays put for the whole term.

Worked example: $25,000 and $60,000

Assumptions: the personal loan is at 11.86%, the G.19 average, repaid over five years. G.19 measures two-year loans, so a five-year rate may differ. The HELOC is at 8.00% (the 7.00% prime rate plus an example 1.00% margin; yours may be higher) and repaid over the same five years. The last row shows the HELOC if prime rose two points for the whole time. Fees are not included.

Calculated by LenderMatch. Illustrations, not quotes.

At $25,000 the HELOC saves about $2,846 in interest over five years. That is real money, but HELOC setup costs, an annual fee or a two-point rate rise eat into it, and you wait longer for the cash. At $60,000 the saving grows to about $6,831, which more fees can absorb.

Fees can tilt it the other way too. If a personal loan carries a 5% origination fee taken from the proceeds, you need to borrow about $26,316 to receive $25,000, and the five-year cost of interest plus fee rises to about $10,011. On $60,000 the same fee pushes the cost to about $24,027.

The HELOC payment calculator shows both phases of a line, and the debt consolidation calculator compares what you pay on cards and loans now against one HELOC.

Fees and closing costs

The CFPB says that under some plans HELOC lenders might charge an application fee, origination, appraisal, title or other closing costs, an annual fee, an inactivity fee, a fee to convert part of the balance to a fixed rate, and a cancellation fee if you close the line early, usually within the first two or three years. Many lenders pay some or all of the closing costs if you keep the line open for a set time; home equity closing costs has published examples.

For personal installment loans, the CFPB lists origination and documentation fees, optional credit insurance and late fees. Published terms vary widely: one national online lender charges an origination fee of 1.85% to 9.99%, deducted from the loan proceeds, while one national bank charges no origination fee, closing fee or prepayment penalty.

Which is faster: a HELOC or a personal loan?

Usually the personal loan. One national bank says most customers receive personal loan funds the same day they are approved. A HELOC needs a home valuation, which may be a full appraisal or an automated estimate (see HELOC without an appraisal), plus title work. Then, on your main home, Regulation Z gives you three business days after opening to cancel, and the lender can’t release money until that period ends. If you need cash this week, that matters.

Is HELOC or personal loan interest tax deductible?

HELOC interest can be deductible only when you use the money to buy, build or substantially improve the home that secures the line, and you itemize (IRS Publication 936). Details are in is HELOC interest tax deductible. For a personal loan, IRS Topic 505 lists “credit card and installment interest incurred for personal expenses” among the types of interest that are not deductible. For a remodel, that can widen the HELOC’s advantage; for paying off cards, neither is deductible.

When a personal loan makes more sense

• The amount is small, so HELOC setup costs and time take a bigger share of the savings.
• You need the money fast.
• You don’t want your home on the line, or you have little equity to borrow against.
• You want a fixed payment and a firm payoff date, with no risk of the rate rising.
• You may sell soon. A HELOC is tied to the house and is normally paid off when you sell, which can make paying its setup costs a poor deal.

When a HELOC makes more sense

• The amount is larger, where the lower rate saves thousands.
• Costs arrive over time, such as a remodel paid in stages. You pay interest only on what you draw.
• You are improving the home, where the interest may be deductible. See HELOC for home improvement.
• You have solid equity and a plan to pay down the balance, beyond the minimum payment. How much equity you can borrow shows the lender formula, and HELOC vs home equity loan covers the fixed-rate home equity option.

For paying off credit cards specifically, using a HELOC for debt consolidation works through $30,000 of card debt and the habits that keep the balances from returning.

Frequently asked questions

Is a HELOC better than a personal loan?

It depends on the amount, your timeline and how you feel about putting your home up as collateral. A HELOC typically has a lower rate and longer repayment, which matters more as the amount grows. A personal loan is unsecured, has a fixed payment and can fund within days, which often makes it the simpler choice for smaller amounts.

Is a HELOC cheaper than a personal loan?

Usually on interest. Commercial banks averaged 11.86% on 24-month personal loans in the second quarter of 2026 (Federal Reserve G.19, released October 7, 2026), while a HELOC is priced at the prime rate, 7.00%, plus a margin. Fees can narrow the gap on small amounts, so compare the total cost.

Is a HELOC easier to get than a personal loan?

They test different things. A HELOC requires enough equity in your home plus credit and income approval, and it involves a home valuation and title work. A personal loan rests on your credit and income alone. One national bank says checking your personal loan rate won’t affect your credit score, though a full application triggers a hard credit pull.

Should I use a HELOC or a personal loan for debt consolidation?

A HELOC usually saves more interest on large balances, but it turns unsecured card debt into debt secured by your home. A personal loan keeps the home out of it and forces a fixed payoff date. Our debt consolidation calculator compares your current payments with a HELOC.

Is a HELOC or personal loan better for home improvement?

For larger projects, a HELOC often wins on rate, and its interest can be tax deductible when the money is used to buy, build or substantially improve the home that secures it. Personal loan interest for personal expenses is not deductible. For a small, quick project, a personal loan avoids the HELOC’s setup time and home valuation.

See HELOC offers from several lenders →