{"id":1043989,"date":"2024-09-06T10:26:33","date_gmt":"2024-09-06T14:26:33","guid":{"rendered":"https:\/\/www.finder.com\/ca\/?p=1043989"},"modified":"2026-01-16T17:38:40","modified_gmt":"2026-01-16T22:38:40","slug":"personal-line-of-credit-vs-heloc","status":"publish","type":"post","link":"https:\/\/www.finder.com\/ca\/personal-loans\/personal-line-of-credit-vs-heloc","title":{"rendered":"Personal line of credit vs HELOC"},"content":{"rendered":"

A personal line of credit and a home equity line of credit (HELOC) both provide access to a revolving line of credit. But while similar in many ways, there are also some key differences between the two\u2014most notably, a HELOC is secured by the equity in your home.<\/p>

Keep reading for a side-by-side personal line of credit vs HELOC comparison to help you decide which credit option is right for you.<\/p>

Quick summary: personal line of credit vs HELOC<\/h3>
<\/th>Personal line of credit<\/th>HELOC<\/th><\/tr><\/thead>
Is it secured or unsecured?<\/strong><\/td>Usually unsecured<\/td>Secured by the equity in your home<\/td><\/tr>
How much can I borrow?<\/strong><\/td>Up to $50,000 (more in some cases)<\/td>Up to 65% of your home\u2019s value<\/td><\/tr>
What can I use it for?<\/strong><\/td>Any legitimate purpose<\/td>Any legitimate purpose<\/td><\/tr>
Where can I get it?<\/strong><\/td>Mostly banks and credit unions, some online lenders<\/td>Mostly banks and credit unions<\/td><\/tr>
Loan terms<\/strong><\/td>Ongoing<\/td>Ongoing<\/td><\/tr>
Interest rates<\/strong><\/td>Usually variable<\/td>Variable<\/td><\/tr>
How to apply<\/strong><\/td>Online or at a branch<\/td>Online or at a branch<\/td><\/tr><\/tbody><\/table>

What is a personal line of credit and how does it work?<\/h3>

A personal line of credit works a lot like a credit card, but it has a lower interest rate and a higher credit limit. It\u2019s a revolving line of credit that you can access whenever you need up to a predetermined limit. Interest rates are usually variable, and you only pay interest on the money you borrow. It\u2019s easy to access your personal line of credit funds by making an ATM withdrawal, writing a cheque or by transferring money via online or mobile banking.<\/p>

There\u2019s no fixed repayment period with a personal line of credit, but once you repay the money you borrow, it becomes available for you to access again as needed. Personal lines of credit are usually unsecured, but you\u2019ll get a better rate and a higher limit if you provide collateral for the loan.<\/p>

You can use the funds from a personal line of credit however you want, including paying for home renovations, a vacation, medical bills or a new car.<\/p>

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What are the current line of credit rates?<\/p>\n <\/div>\n\n <\/div>\n\n

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Why should I get a personal line of credit?<\/h3>

There are several reasons why a personal line of credit might be the right choice for you.<\/p>

  • No collateral required.<\/strong> Unlike a HELOC, you don\u2019t have to provide an asset as security for a personal line of credit.<\/li>
  • Lower interest rate than a credit card.<\/strong> Lines of credit typically come with lower interest rates than credit cards, making them a more affordable option.<\/li>
  • Easy access to funds when needed.<\/strong> Because this option provides revolving credit, you can withdraw cash from your line of credit whenever you want.<\/li>
  • Flexible.<\/strong> If you\u2019re unsure how much money you\u2019ll need to cover upcoming expenses\u2014if you\u2019re renovating your home, for example\u2014a line of credit provides greater flexibility than a lump-sum personal loan.<\/li><\/ul>

    What to watch out for<\/h3>
    • Risk of unnecessary spending.<\/strong> Just because you have credit available, it doesn\u2019t mean you should use it, so be wary of spending more than you need to (or more than you can afford to repay).<\/li>
    • Fees.<\/strong> Check the fine print to find out whether any admin, ongoing or late payment fees apply.<\/li>
    • Rising interest rates.<\/strong> If interest rates rise, your line of credit repayments will rise too.<\/li><\/ul>

      What is a HELOC and how does it work?<\/h3>

      A HELOC is a home equity line of credit. It provides a revolving line of credit that you can access when needed. Interest is variable, and there\u2019s no fixed repayment period.<\/p>

      Just like a personal line of credit, the funds from a HELOC can be used to pay for just about anything. And the money you repay goes back into your credit line, so it\u2019s available for you to access again when needed.<\/p>

      But the key difference between a HELOC and a personal line of credit is that a HELOC is secured by the equity in your home. A HELOC can be combined with your mortgage or exist as a standalone product, and credit limits of up to 65% of your home\u2019s value are available. This means that you can access larger amounts than with a personal line of credit.<\/p>

      Tapping into your home equity reduces the risk for the lender, so you can access a higher credit limit and a lower interest rate than with an unsecured loan. The downside is that it increases the risk for you\u2014if you can\u2019t keep up with repayments, the lender can repossess or sell your home.<\/p>

      Why should I get a HELOC?<\/h3>

      If you own your home, there are several reasons why a HELOC might be a good choice.<\/p>

      • Higher credit limits.<\/strong> You can access a larger credit amount with a HELOC than with an unsecured line of credit.<\/li>
      • Competitive rates.<\/strong> Providing your home equity as collateral will help you access a lower interest rate.<\/li>
      • Less-than-perfect credit is OK.<\/strong> You may be able to qualify for a HELOC if your credit history is less than perfect, but you\u2019ll need to have sufficient income to manage repayments.<\/li>
      • Flexible access to funds.<\/strong> You can take advantage of quick and easy access to funds whenever you need.<\/li><\/ul>

        What to watch out for<\/h3>
        • You need to own your home.<\/strong> If you\u2019re renting, you\u2019ll need to consider an unsecured line of credit instead.<\/li>
        • You put your property at risk.<\/strong> The lender could seize your home if you can\u2019t make repayments, so a HELOC is not suitable for everyone.<\/li>
        • Watch out for fees.<\/strong> Appraisal fees, title search fees, legal fees and origination fees may apply, so read the fine print carefully.<\/li>
        • Rising interest rates.<\/strong> Rates are variable, so the cost of repayments will increase if interest rates rise.<\/li>
        • Hard to switch lenders.<\/strong> If your HELOC is combined with a mortgage and you want to switch to a different lender, you may have to repay your HELOC in full before you can do so.<\/li>
        • Overspending.<\/strong> Just like with a personal line of credit, you\u2019ll need to be careful to avoid spending too much.<\/li><\/ul>

          Personal line of credit vs HELOC: Which is right for me?<\/h3>

          There are several good reasons why you might choose a personal line of credit over a HELOC and vice versa. Both products offer flexible access to funds and lower interest rates than a credit card, providing convenient solutions to help you manage ongoing expenses.<\/p>

          The benefits of a HELOC are simple: you can qualify for a larger credit amount and a better interest rate than with an unsecured line of credit. The downsides are that you can potentially take on a higher level of debt, and you risk losing your home if you can\u2019t keep up with repayments.<\/p>

          So if you don\u2019t own a home or you don\u2019t want to put your home at risk by using it as collateral, a personal line of credit may be a better option.<\/p>

          Ultimately, the right choice for you depends on your personal financial situation and what you\u2019re willing to risk.<\/p>

          Compare personal lines of credit<\/h3>
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