How a home equity loan works
A home equity loan is a second loan secured by your home. You get a lump sum, pay a fixed rate, and keep your first mortgage as it is. Because the loan is secured, rates are usually lower than unsecured debt, and terms can be much longer.
CapCenter home equity loans have a fixed rate for 15, 20 or 30 years, loan amounts from $50,000 to $250,000, and ZERO Closing Costs (restrictions apply).
How a personal loan works
A personal loan is usually unsecured, so your home isn't on the line. Approval is based mostly on your credit and income. Rates are usually higher than a home equity loan, and terms are shorter, often 2 to 7 years. Many personal loans charge an origination fee, which can be a meaningful percentage of the loan.
A $50,000 comparison
Here is a hypothetical example. APR may differ; example only. Rates change daily.
- Personal loan at 12% for 5 years: about $1,112 a month, and about $16,700 in total interest
- Home equity loan at 8% for 15 years: about $478 a month, and about $36,000 in total interest
- The home equity loan has the much lower payment, but costs more in total interest over 15 years unless you pay it off faster
Example details: $50,000 15-year fixed home equity loan at 8.000% (8.055% APR): 180 monthly payments of $477.83. Principal and interest only; taxes and insurance not included, so the actual payment will be higher. Unless noted, APR assumes ZERO Closing Costs, no discount points and 15 days of prepaid interest. Hypothetical example prepared November 4, 2026, not a current CapCenter rate offer; subject to credit approval.
Reading the example
The monthly payment and the total cost tell different stories. A longer term lowers the payment and frees up cash each month. A shorter term costs less overall. With a home equity loan, you can often pay extra toward principal to shorten the payoff. Check your loan terms for any prepayment rules, though many common home loans don't have a prepayment penalty.
Risk
This is the biggest difference. If you can't pay a personal loan, your credit suffers and the lender may pursue collection. If you can't pay a home equity loan, your home is at risk. Only borrow against your home if your income can comfortably support the payment.
Speed and simplicity
Personal loans can fund in days. A home equity loan involves more steps, including verifying your income and your home's value. Most CapCenter home equity loans close in a few weeks, and an appraisal usually isn't needed.
How to choose
- Larger balance and stable income: a home equity loan may cost less each month.
- Smaller balance, or you want it paid fast: a personal loan's shorter term may cost less in total.
- Uneven income: an unsecured loan keeps your home out of it.
- Either way, compare the total interest and fees, not just the payment.
