In our last post, we talked about ‘ HOME EQUITY LOAN VS. REFINANCE? ‘. Now let’s talk about Home equity loan vs. personal loan?
Loans are taken for a myriad of things. All of which involves obtaining funds to go after something you want. As such the dilemma between the home equity loan vs. personal loan should be such a big deal. Both are loans; they both require interests for repayment and are used to fund anything. Well, almost anything. A home equity loan is a loan that is taken to fund just about anything from home expansion, to purchase of equipment, to college funding, and so much more. The only clear difference with this and other loans is that this one is backed against the home as a collateral and no other asset. A personal loan, in similar regard, is a loan that is taken to handle some financial obligations. However, the core difference of the personal loan to the home equity loan is the fact that the personal loan isn’t backed by collateral. There are regarded as unsecured loans for this reason, and the aim is to be able to meet your current financial needs and emergencies. The comparison between home equity loan vs. personal loan is as follows:
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Home equity loan vs. personal loan – Differences
This is the major difference of the home equity loan vs. personal loan. The personal loan is quite simply unsecured. There is no collateral, and as such, the lenders do not possess a lien to any asset. The home equity loan, on the other hand, is backed by collateral. It is, however, backed by only one collateral which the borrower’s own home.
The interest rate for the home equity loan is generally lower than a lot of other loans. Why won’t it? Being that it is backed against one of an individual’s most priced property, it is easier for the lender to take the risk or at least make it more conducive for you to pay back being that you can lose your house. However, for this same reason, the interest for the personal loan is higher. It is a clear difference between the home equity loan vs. personal loan.
The funds available to be borrowed for a home equity loan is usually high – up to the value of your home property which is usually a lot. Hence, you can get huge sums of money from the lender. However, since the personal loan is unsecured, you get significantly lower funds. It can even be as little as $1000! The requirement for the fund would generally help you decide between the home equity loan vs. personal loan.
From the foregoing, it is clear that the process of getting the home equity loan is much longer. First, because of the availability of collateral, the lender has to appraise and value the home property. The documents of the house also have to be assessed as well as the repayment options. However, with a personal loan, the process is much shorter. All you probably need to get this unsecured loan is your good credit score, and you’ll be ready in a few days or even hours depending on the lending company.