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Home Equity Loan vs. Personal Loan: How to Get the Funds You Need

We all need access to cash sometimes. Whether it’s to cover an unexpected car repair, make home improvements, or consolidate high-interest credit card debt , the right loan can provide the financial resources you need.

And you’re not alone if you’re looking for help. According to the St. Louis Federal Reserve , there’s $371.15 billion in outstanding home equity lines of credit, as of April 4, 2018. On top of that, TransUnion reported that there’s nearly $107 billion in personal loan balances, as of the second quarter of 2017.

As you consider your funding options, you might consider a home equity loan or personal loan. To understand which is best for you, compare a home equity loan versus a personal loan. Here’s what you need to know.

Home equity loan vs. personal loan: What’s the difference?

The biggest difference between a home equity loan and a personal loan is the fact that you aren’t required to provide collateral for a personal loan. When you get a home equity loan , your property secures the loan. If you can’t pay, the lender can repossess your home to recover the debt.

Borrower beware: Financing a small business with your own money is tricky

When Diana Yin opened her BBQ food truck, Peaches Smokehouse & Southern Kitchen , in Los Angeles in 2013, she didn’t want the stress of a business loan.

“I wanted my monthly overhead and expenses to be as low as possible,” she says.  So she withdrew $20,000 from her 401(k) plan and borrowed nearly $30,000 on three credit cards.

Though she had to pay a 10% penalty for cashing out of her retirement fund early, “it was worth having the cash on hand to launch the business without having to worry about paying back a monthly loan,” she says. Today, in addition to Peaches, Yin has opened a new brick-and-mortar concept, Poppy + Rose, in downtown LA.

Like Yin, many small businesses look beyond traditional business loans to other more flexible sources of funding such as home equity, credit cards and contributions from family and friends to raise money, says Michael Glauser, executive director of Entrepreneurial Programs at Utah State University's Jon M. Huntsman School of Business.

Any advantage between joint and single home equity lines?

Me and my wife are thinking about it, but not sure if to go with joint or single? What are pros and cons?

TAGS: Mortgages, Home Loan, Bank, Banking, Finance.

It's an equity line. It HAS to be titled at least in the same manner as the house. If the house is a joint ownership then so WILL the loan. They will demand all owners pledge to the loan.