Should I use a personal loan or my home equity to pay off credit card debt?
The short answer
It depends on the amount and your credit. A personal loan is fast and doesn't put your home at risk, but its rate is usually higher and its term shorter, so payments are bigger. Home equity usually costs less and spreads payments out, but your home secures it. For smaller balances with good credit, a personal loan can be the better call; for larger balances, home equity usually saves more, and The Mortgage Advisory will show you both honestly.
How do they compare?
| Personal loan | HELOC / home equity loan | |
|---|---|---|
| Secured by | Nothing (unsecured) | Your home |
| Typical rate | Higher; depends heavily on credit | Usually lower |
| Term | Often 2 to 7 years | Often 5 to 30 years |
| Payment | Higher, pays off faster | Lower, can stretch longer |
| Closing costs | Often an origination fee | Varies by program |
| Speed | Very fast | Days to a few weeks |
When is a personal loan better?
- Smaller balances, where closing costs on a home loan would eat the savings
- Strong credit, which gets a personal loan rate closer to home equity rates
- You don't want your home involved at all
- You want a short, forced payoff
When is home equity better?
- Larger balances, where the rate difference saves real money
- You want a lower monthly payment to free up cash flow
- You have plenty of equity and a stable income
Whichever you choose
Compare the total cost, not just the payment, and pick a payoff date you'll actually stick to. See the risks of turning card debt into home debt.
Example scenario (illustrative)
A homeowner in Denver owes $9,000 on one card and has excellent credit. A 3-year personal loan pays it off fast without touching his home, so that's his pick. His sister owes $46,000 across six cards; a fixed-rate HELOC saves her far more in interest and cuts her monthly payments in half.
Our take
I won't push you into a home loan when a personal loan is the better deal. For bigger balances, home equity usually wins, and I'll show you the numbers both ways.
Ace Ausar, Mortgage Banker · NMLS #1143018
The Mortgage Advisory, Inc. · NMLS #1549739
Reviewed by Ace Ausar, NMLS #1143018 · Updated
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