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HELOC vs. Personal Loan: Which is Better for You?

Borrowing money is not a problem. However, when you are a homeowner and you need money, either to fix your house, to consolidate your debts, or to pay a big upcoming bill, the two most popular options are a Home Equity Line of Credit and a Personal Loan.

Although both alternatives provide access to cash, they operate quite differently. The decision to select the right one can influence the amount of interest you pay and the flexibility of the payments, as well as the speed of approval. We think that making the right financial decision begins with a clear understanding of your choices. So, we can start with the comparison of HELOCs and personal loans and how to choose the one that suits you best.

What Is a HELOC?

A HELOC, or Home Equity Line of Credit, is a revolving credit line using your home equity as collateral. Equity is the value of your home in the market now, minus the amount you owe on your mortgage. Therefore, when your house is worth 300,000 dollars and you have a mortgage of 200,000 dollars, you may have 100,000 dollars of equity that you can borrow against.

HELOC provides you with a line of credit, like a credit card, which you can access over time, usually a specific amount of time called the draw period. You will pay interest only on the amount you draw, and when the draw period is over, you will be in the repayment phase, and you will begin to repay both interest and principal.

HELOCs are usually variable rate loans, so your payment can change with time. They tend to provide lower interest rates compared to unsecured loans because they are secured by your home.

What Is a Personal Loan?

A personal loan is a fixed installment loan that doesn’t require collateral. You borrow a lump sum upfront and pay it back over a set term, usually between two to seven years, with fixed monthly payments.

At TCECU, personal loans are used for a wide range of purposes—from consolidating credit card debt to covering emergency expenses or financing a major purchase. Approval is based on your creditworthiness, income, and ability to repay the loan. The interest rate is fixed, so your monthly payment remains consistent for the duration of the loan.

Because personal loans are unsecured, the interest rate may be slightly higher than a HELOC—but you don’t risk your home as collateral.

Comparing the Two: Key Differences

When choosing between a HELOC and a personal loan, it’s important to look at how each option aligns with your goals and financial situation.

The biggest difference is how and when you access the money. A HELOC acts like a credit line—you can borrow, repay, and borrow again during the draw period. A personal loan gives you a one-time lump sum, which may be more suitable if you have a specific project or fixed expense.

Repayment structure is another key difference. Personal loans come with predictable, fixed payments. HELOCs may start with interest-only payments, but those can increase later when you begin repaying the principal.

Loan terms and interest rates also vary. HELOCs often have longer repayment terms and lower starting rates—but they’re variable, so your rate may increase over time. Personal loans have fixed rates and terms, giving you certainty in your monthly budget.

Finally, a HELOC is a secured loan, meaning your home is at risk if you fail to make payments. A personal loan is unsecured, which means you won’t lose your home—but you may pay a bit more in interest depending on your credit profile.

When a HELOC Might Be the Better Option

A HELOC can be a smart choice for homeowners who need ongoing or flexible access to funds—especially if you’re planning a large renovation or facing expenses that will come in stages.

Let’s say you want to remodel your kitchen, but you’re hiring contractors in phases. With a HELOC, you can draw money as each part of the project begins, rather than borrowing a full lump sum upfront. You’ll only pay interest on what you use, and if the project costs less than expected, you won’t be stuck with extra debt.

HELOCs are also popular for managing unexpected expenses. Because they function as a revolving line of credit, you can use them more than once without reapplying.

However, a HELOC requires sufficient home equity and often comes with additional costs such as appraisals, title fees, or closing costs. It’s also subject to market conditions—if home values decline or interest rates rise, you may lose access to funds or pay more over time.

When a Personal Loan Might Be the Better Option

A personal loan is best when you need a fixed amount of money for a specific purpose and want predictable repayment terms. If you’re consolidating credit card debt, paying for a wedding, or covering medical expenses, a personal loan may provide more stability.

Since personal loans have fixed interest rates, you’ll know exactly what your payment will be each month. There’s no draw period, no variable rate, and no risk of borrowing more than you need. This helps you stay on track financially.

Additionally, because there’s no need for home equity, a personal loan may be your only option if you’re a new homeowner or still building equity. The application process is often faster, too—some approvals at TCECU are available within one business day, with funds following shortly after.

Personal loans also don’t carry the same foreclosure risk that comes with a HELOC, which is important for borrowers who prefer not to use their home as collateral.

What Should You Consider Before Deciding?

Before choosing between a HELOC and a personal loan, consider the following:

  • How much money do you need? For large, multi-phase projects or uncertain costs, a HELOC offers flexibility. For a defined expense, a personal loan may be better.
  • Do you have enough home equity? If you don’t have at least 15–20% equity in your home, a HELOC may not be available.
  • Is your income steady? A HELOC’s variable rate can increase payments unexpectedly. A personal loan offers stable payments, which may be more manageable if your income is fixed.
  • How comfortable are you with using your home as collateral? If you’re concerned about risking your home, a personal loan offers peace of mind.
  • Do you prefer flexibility or structure? A HELOC adapts to changing needs. A personal loan provides clear, structured repayment.

Choosing the Right Loan with TCECU

At TCECU, we don’t believe in one-size-fits-all lending. That’s why we offer both HELOCs and personal loans, along with personalized guidance to help you make the decision that fits your life and your budget.

When you work with us, you’re not just a number. You’re a member of a credit union that puts people over profits. Our team takes the time to understand your goals, your financial picture, and your comfort level with repayment—so we can help you move forward confidently.

Our personal loans feature competitive fixed rates, no prepayment penalties, and flexible terms that fit your needs. Our HELOCs offer generous credit limits, low introductory rates, and ongoing access to funds whenever you need them.

Let’s Make the Right Move Together

Deciding between a HELOC and a personal loan doesn’t have to be overwhelming. It just takes a clear look at your financial goals, your borrowing needs, and your comfort with repayment.Whether you’re planning a big project, managing debt, or simply exploring your options, TCECU is here to help you find the path that makes the most sense. Reach out today or visit tcecu.org to learn more, get personalized advice, and take the next step.