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Compare personal loans vs. home equity loans

Two ways to make your next big financial move. What are the differences?


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If you’re a homeowner and need to borrow money for a renovation or other large expense, you may be considering getting a loan. Personal loans and home equity loans vary in a few ways, presenting different risks and rewards.

Read our guide to learn more about how they differ and how you can compare your options to make the best choice for your financial situation.

LoanConnect Personal Loan

LoanConnect Personal Loan


10 % APR


  • Submit one application to compare multiple lenders
  • No application or origination fees

LoanConnect Personal Loan

Compare personal loans from a range of lenders and borrow up to $50,000 through this online broker.

  • APR: 10.00%-46.96%
  • Loan amounts: $500-$50,000
  • Loan terms: 6-60 months
  • Fees: No application or origination fees
  • Processing time: Receive funds within as little as 24 hours.
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home-loan-imageSo, what is a home equity loan?

Home equity loans and lines of credit let you capitalize on the equity you have in your existing home. They enable you to utilize the capital gains of your house without needing to sell it. Your home equity is essentially the current value of your property minus the mortgage you owe.

Current home value – mortgage = home equity

In Canada, you can borrow up to 65% of the value of your home. This means if your home is worth $500,000, you can access up to $325,000. But, any outstanding mortgage balance plus your home equity loan or line of credit cannot equal more than 80% of your homes value. So if you’ve only paid $100,000 on your $500,000 home, you wouldn’t be able to borrow any money because you simply don’t own enough equity in your home. If you’d paid $200,000 on your mortgage, you’d be able to borrow up to $100,000 through a HELOC.

How much can I borrow?

Here’s how to figure out how much you can borrow with a home equity loan or line of credit:

  • Take the value of your home and multiply it by 0.8 (0.8 represents the maximum amount of 80%).
  • From this number, subtract the balance of your mortgage.
  • The remaining amount is the amount you’d be able to borrow – as long as the amount does not exceed 65% of the value of your home.

What you need to know about personal loans

Personal loans usually come either secured or unsecured.

  • Unsecured personal loans give you access to funds without you providing any type of collateral.
  • Secured personal loans require you to list a valuable asset as collateral, such as equity in your home or your car, in order to guarantee the loan.

You can also usually choose between two types of interest rates:

  • Fixed rate personal loans have interest rates that stay the same throughout the loan term. This means your repayments will be the same every month throughout the entire term of your loan.
  • Variable rate personal loans change throughout the term of the loan, usually starting out with a lower interest rate than their fixed rate counterparts. There is, of course, the possibility that the interest rate will increase over time.

Here are a couple of things to keep in mind:

  • Most personal loan lenders only offer borrowing amounts up to $35,000 (and sometimes slightly higher), whereas you’ll likely be able to borrow up to 80% of the value of your home, which could be a lot higher than $35,000.
  • However, even with an equivalent interest rate, a personal loan may be the cheaper option. Large monthly payments combined with a loan term of five or seven years means that the interest you’ll be paying on a personal loan will be less than the interest you’ll pay on a home equity loan.

Compare your personal loan options

Name Product Interest Rate Max. Loan Amount Loan Term Fees Min. Credit Score Link
Mogo Personal Loan
9.90% - 47.42%
9 months - 5 years
NSF fee - $20 - $50
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Mogo offers loans up to $35,000 on flexible terms.
Loans Canada Personal Loan
Secured from 2.00%, Unsecured from 8.00% to 46.96%
3-60 months
No application or origination fees
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Loans Canada connects borrowers to lenders offering both secured and unsecured personal loans in amounts from $300 to $50,000. Submit one application to get rates from multiple lenders across Canada.
LoanConnect Personal Loan
6-60 months
No application or origination fees
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LoanConnect is an online broker that matches borrowers to lenders offering loans in amounts from $500 to $50,000. Get approved for multiple loan offers from different lenders in as little as 60 seconds with any credit score.
Fairstone Personal Loan (Unsecured)
26.99% - 39.99%
6 months - 5 years
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Fairstone offers unsecured personal loans up to $20,000
Cash Money Installment Loan
6 months - 5 years
Vary across provinces/territories
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Cash Money offers installment loans up to $10,000 for AB, MB and NB residents.
LendDirect Personal Loan
19.99% - 46.93%
No end dates
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Borrow up to $15,000, based on your income and credit history, with a personal line of credit from LendDirect.
LendingMate Personal Loan
43% (British Columbia and Ontario) and 34.90% (Quebec)
1-5 years
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More Info
LendingMate offers loans to Canadians with poor credit with no credit checks. Guarantor required for application.
Fairstone Personal Loan (Secured)
19.99% - 23.99%
3-10 years
Varies by province
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More Info
Fairstone offers secured personal loans up to $35,000.

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Main differences between personal loans and home equity loans

Personal loan Home equity loan
Collateral required None, if unsecured Your home
Interest rate Generally 4% to 36.00% Generally 3% to 8%
Repayment period Usually 1-10 years Usually 10-30 years
Maximum loan amount Can be up to $35,000, sometimes higher amounts up to $100,000 Up to 65% of your homes value (Your mortgage + HELOC cannot be more than 80% of your homes value)

Which is better for you — a personal loan or a home equity loan?

Both home equity loans and personal loans offer specific benefits, as well as drawbacks.


Personal loan pros:

  • Useful if you don’t have any assets to guarantee a loan.
  • Generally offer shorter loan terms, making the total loan cost cheaper.

Personal loan cons:

  • Interest rates are usually higher than those offered for home equity loans.
  • There will likely be associated fees.

Home equity loan pros:

  • Useful when you have a decent amount of equity in your home.
  • Typically offer lower interest rates than personal loans.

Home equity loan cons:

  • Will usually cost more than a personal loan since the loan term is much longer.
  • There will be associated fees.

4 questions to ask when choosing a loan

Making a financial decision can be tough when you have plenty of options and little guidance. Consider asking yourself these questions when deciding on the right loan for your needs:

Monthly payment vs. repayment period

family need cashConsider that you’re five years into your 30-year mortgage and you need a loan of $20,000.

A secured personal loan has an interest rate of 8.90% while a home equity loan has a rate of 6.39%. Your monthly mortgage payments will increase by $150 if you take on the home equity loan, which is less expensive than the $321 payment for the personal loan.

However, over the life of your mortgage, you’ll pay more in interest on the home equity loan than you would on the personal loan. Even though the interest rate is higher on the personal loan, it will still be cheaper in the long run.

The decision rests in whether you want lower monthly payments or a less expensive loan.

Consider the interest when comparing personal loans and home equity loans

  • It’s worth noting that the longer you carry your debt, the more you pay in interest. That’s why choosing a loan with the shortest repayment term you can afford usually saves you money in the long run.
  • Borrowing against your home’s equity too frequently could be costly. Carefully examine the terms to see if a personal loan with a shorter repayment period might work better for you.

Frequently asked questions

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