Three ways to borrow for a home improvement
A home improvement loan is any loan you use for the project; the three common choices differ in rate, term and what secures them. A HELOC is a revolving line against your home with a variable rate, while a home equity loan is a lump sum against the home, usually at a fixed rate.[4] A personal loan is unsecured, so your home is not at risk, but the rate is higher: banks averaged 11.90% on 24-month personal loans in the third quarter of 2026.[1]
| Option | Rate | Monthly payment | Term | Total interest |
|---|---|---|---|---|
| HELOC | 7.50% variable | $313 then $403 | 10 + 20 years | $84,171 |
| Home equity loan | 8.25% fixed | $485 | 15 years | $37,313 |
| Personal loan | 11.90% fixed | $1,110 | 5 years | $16,582 |
The HELOC rate is prime (7.00% on Nov 12, 2026)[2] plus an illustrative half-point margin; the home equity loan rate is an illustration, not an average. Put your own quotes into the calculator.
Lowest payment is not lowest cost
The longest loan has the lowest payment and the highest total interest, so compare options over the same term before judging the rate. Paid off in five years, the same $50,000 costs:
| Option | Rate | Monthly payment | Total interest |
|---|---|---|---|
| HELOC, repaid in 5 years | 7.50% | $1,002 | $10,114 |
| Home equity loan, 5 years | 8.25% | $1,020 | $11,189 |
| Personal loan, 5 years | 11.90% | $1,110 | $16,582 |
Over equal terms the secured options cost less, because the rate is lower. The HELOC's advantage disappears if you only pay interest for years; most of its $84,171 lifetime interest in the first table comes from a decade of interest-only payments that repay nothing.[3]
Worked example
- A $60,000 kitchen with $10,000 in savings leaves $50,000 to borrow.
- HELOC at 7.50%: $312.50 a month for 10 years, then $402.80 for 20 years; $84,171 of interest if you pay only the minimum.
- Home equity loan at 8.25% for 15 years: $485.07 a month, $37,313 of interest.
- Personal loan at 11.90% for 5 years: $1,109.70 a month, $16,582 of interest, and no lien on the home.
- Paying the HELOC on a 5-year schedule instead ($1,001.90 a month) brings its interest down to $10,114.
Tax angleInterest on a HELOC or home equity loan used to substantially improve the home that secures it can count as deductible home mortgage interest if you itemize; personal-loan interest does not.[5] The rules and the 2026 standard deduction are on is HELOC interest tax deductible.
How much can you borrow against the house?
A secured option is limited by your equity: the lender's combined loan-to-value cap times the home's value, minus the mortgage. Check that on the HELOC LTV calculator before you settle on a project budget, and see the payment jump at the end of a draw period on the HELOC payment calculator.
Price the project first
A loan should follow a budget, not set it. Estimate the job with the kitchen remodel, bathroom remodel, roof replacement or window replacement calculators, then add a contingency before you decide how much to borrow. Payments by project size at the rates above:
| Amount | HELOC interest-only (7.50%) | Home equity loan, 15 yr (8.25%) | Personal loan, 5 yr (11.90%) |
|---|---|---|---|
| $10,000 | $63 | $97 | $222 |
| $25,000 | $156 | $243 | $555 |
| $50,000 | $313 | $485 | $1,110 |
| $100,000 | $625 | $970 | $2,219 |
Frequently asked questions
What is the monthly payment on a $50,000 home improvement loan?
It depends on the loan: about $485 over 15 years at 8.25%, $1,110 over 5 years at 11.90%, or $313 interest-only on a HELOC at 7.50%.
Is a HELOC or a personal loan better for home improvements?
A HELOC usually has the lower rate because the home secures it, and its interest can be deductible when the money improves that home.[5] A personal loan costs more but puts no lien on the house and has a fixed payoff date.
What are average personal loan rates?
Commercial banks averaged 11.90% on 24-month personal loans in the third quarter of 2026 (preliminary), according to the Federal Reserve.[1] Your rate depends on your credit and the lender.
Should I pay cash for a home improvement?
Cash costs no interest, but keep an emergency reserve. Putting some cash in, as in the example, cuts the amount you borrow and every payment that follows.
Sources
- Consumer Credit (G.19): Terms of Credit, commercial bank interest rate on 24-month personal loans
- H.15 Selected Interest Rates (bank prime loan rate)
- What You Should Know About Home Equity Lines of Credit (HELOC)
- What is the difference between a home equity loan and a home equity line of credit (HELOC)?
- Publication 936 (2025), Home Mortgage Interest Deduction