HELOC vs. personal loan for debt consolidation

A personal loan is faster, fixed, and doesn't touch your home. A HELOC is usually cheaper. Which one wins depends on the size of the debt and how much rate risk you can carry.

Reviewed by Shawn Way, NMLS #1007298★ 4.9 from 111 reviewsUpdated October 28, 2026

Side by side

$25,000 over 5 years

Origination fees are usually deducted from the loan, so you'd borrow a little more to net $25,000. The table ignores that, which flatters the personal loan slightly.

How to choose

• Choose the HELOC if the debt is $15,000 or more, you have 20%+ equity, and you can handle a payment that moves with prime.
• Choose the personal loan if the debt is small, you need the money fast, you're near your equity limit, or you want zero risk to the house.
• Either way, the savings disappear if the cards fill back up.

Where the costs actually differ

• Upfront fees. Personal loans often take an origination fee of 1%–10% out of the loan amount, so you borrow $25,000 to receive about $23,750. Many HELOCs have small or no opening fees but may charge an annual fee or require a minimum draw.
• Rate type. Most personal loans are fixed. Most HELOCs are variable, though many lenders let you lock all or part of the balance. Fixed-rate HELOC options.
• Speed. A personal loan can fund in one to three days. A HELOC usually takes two to five weeks because of the valuation, title work and the 3-business-day right to cancel on a primary home.
• What's at risk. A personal loan is unsecured: missing payments hurts your credit and can lead to collections. A HELOC is secured by your home.

A second example: $12,000 over 3 years

On a smaller balance the comparison changes. A HELOC at 7.75% APR over 3 years runs about $375 a month and $1,490 in interest. A personal loan at 11.5% with a 3% fee costs about $396 a month, $2,250 in interest and $360 in fees: roughly $1,100 more. But a HELOC may carry an appraisal or title cost of a few hundred dollars and takes weeks, and some lenders won't open a line under $10,000–$25,000. At this size, many people reasonably choose the personal loan for speed and simplicity.

Qualifying for each

Personal loans lean on credit score and income; the best rates usually require 720+ and a low debt-to-income ratio. HELOCs lean on equity: with enough equity, borrowers in the mid-600s often get a rate a personal lender wouldn't match. If your score is under about 640 and your equity is limited, neither may price well. Paying down a card or two first can move you up a tier for both.

Red flags on either side

• A personal loan offer that requires payment protection insurance or another add-on to get the advertised rate.
• A HELOC with a large early-closure fee if you close the line within three years and you might sell soon.
• Any lender that won't give you the APR and total fees in writing before you apply.

More questions

Can I use both a HELOC and a personal loan to consolidate debt?

Yes. Some borrowers take a small personal loan now to clear a high-rate card quickly, then fold it into a HELOC once the line is open. Check the personal loan has no prepayment penalty first.

Is a HELOC or a personal loan better for my credit score?

Neither has a clear edge: a HELOC and a personal loan both add an inquiry and a new account. A personal loan is installment debt, which scoring models treat gently, and how a HELOC balance is scored depends on the model. Either way, paying the cards to zero usually helps more than the new account hurts. Credit impact.

More in debt consolidation

• Pay off credit cards with a HELOC
• HELOC vs. balance transfer
• HELOC vs. debt settlement
• Pay off a car loan with a HELOC
• Pay off student loans with a HELOC
• Does consolidating hurt your credit?
• HELOC to pay IRS tax debt
• HELOC for medical bills

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