# Personal Loan vs. Home Equity Loan for Remodels
Home remodeling projects drain wallets fast. Homeowners choosing between a personal loan and a home equity loan face different trade-offs in rates, terms, and risk.
Personal loans offer speed and simplicity. These unsecured loans require no collateral, so your house stays out of the equation. Lenders like SoFi, LendingClub, and Upgrade typically approve applicants within days. Interest rates range from 6% to 36%, depending on credit score and income. Terms run from two to seven years. The downside: these rates run higher than secured borrowing, and loan amounts max out around $50,000 at most lenders.
Home equity loans tap the value you have built in your property. Banks like Chase, Bank of America, and Wells Fargo offer these products, which double as second mortgages on your house. Interest rates sit between 7% and 12% currently, lower than personal loans for borrowers with solid credit. You can borrow larger sums, often $25,000 to $150,000 or more depending on equity. The catch: your home serves as collateral. If you default, the lender can foreclose.
Home equity lines of credit (HELOCs) present a third option. Like home equity loans, they use your house as collateral, but they work like credit cards with variable rates and flexible draw periods. Current HELOC rates hover around 8% to 12%. You only pay interest on what you borrow.
The math tilts toward home equity lending for larger projects above $25,000. A $40,000 kitchen remodel costs less to finance through a home equity loan than a personal loan. But home equity products expose your primary residence to risk if finances tighten.