If you own a home, is a HELOC cheaper than a personal loan?

Summary

On the rate alone, often yes. U.S. Bank's variable HELOC APRs ranged from 6.20% to 11.10% on September 17, 2026, against 7.74% to 35.99% for Upgrade's fixed-rate personal loans. But a HELOC is a line of credit secured by your house, so the payment can climb when the rate rises or the draw period ends, the lender can freeze the line in some situations, and falling behind can cost you the home.

Two products built differently

A personal installment loan pays you the whole amount at the start and is repaid in equal installments. A HELOC, as the CFPB describes it, is open-end credit that lets you borrow repeatedly against your home equity, meaning the value of the home minus what you still owe on the mortgage. If you already have a mortgage, a HELOC counts as a second mortgage.

You can generally draw up to your limit at any time during the draw period, which the CFPB says could last 10 years, for example. Some plans require a minimum each time you borrow, such as $300. Bank of America's HELOC runs 30 years in total: a 10-year draw period and a 20-year repayment period.

Where the payment can jump

When the draw period ends, you can't borrow any more, and the CFPB says monthly payments are often significantly higher once repayment starts. Some plans require you to pay back the whole balance as soon as the repayment period begins. U.S. Bank warns that choosing interest-only payments during the draw period may cause your payment to increase, possibly substantially, when the line moves into repayment.

The rate moves too. U.S. Bank's APR follows the prime rate as published in the Wall Street Journal, with a ceiling of 18% and a floor of 3.25%. Its lowest rate assumes a line of $50,000 or more, a 60% loan-to-value ratio, a FICO score of 730 or higher, and automatic payments from a U.S. Bank account. The minimum score to qualify is 660.

When the lender can shut the line

Regulation Z limits when a lender can change a home equity plan, but it does allow the lender to stop further draws or lower the limit in several situations. Among them:

The CFPB also notes that if you sell your home, you are generally required to pay off the HELOC in full right away.

Different fees, and a right to cancel

The CFPB's list of fees some HELOC plans charge includes application fees; origination, appraisal, title, or other closing costs; inactivity fees; annual or membership fees; cancellation fees for closing early, usually within the first two or three years; and conversion fees for moving part of the balance to a fixed rate. U.S. Bank charges no application fees or closing costs but has a $75 annual fee after the first year and an early closure fee of 1% of the original line, up to $500, if you close within 30 months. Bank of America's early closure fee within 36 months starts at $450 plus the taxes and third-party costs it paid.

A personal loan has nothing like the rescission right that comes with a line secured by your principal dwelling. Under Regulation Z you can cancel the plan until midnight of the third business day after it's opened (or after you receive the required notice and disclosures, if later), and the CFPB says the lender must then return the fees you paid, including application and appraisal fees.

Sources

Written by Kaz (pen name). Figures are copied from providers' published pricing pages on the dates shown. We have not used these products. Corrections: contact form.