A Home Equity Line of Credit (HELOC) is a popular way to tap home equity, but it comes with significant drawbacks: your home is collateral (foreclosure risk), rates are variable, and approval takes 2–6 weeks. Depending on your situation, one of these alternatives may be a better fit.
Best Alternatives
Personal Loan
Unsecured personal loans from lenders like SoFi, Upstart, and LightStream offer up to $100,000 with no home equity required. Rates start at 6.99% for excellent credit.
Pros: No collateral, funds in 1–3 days, fixed rate
Cons: Higher rate than HELOC for large amounts
Home Equity Loan
A home equity loan (second mortgage) gives you a lump sum at a fixed rate, unlike a HELOC's variable rate line of credit. Your home is still collateral.
Pros: Fixed rate, predictable payments, lower rate than personal loan
Cons: Home is collateral, takes 2–6 weeks
Cash-Out Refinance
Replace your existing mortgage with a larger one and take the difference in cash. Best when current rates are lower than your existing mortgage rate.
Pros: Single payment, potentially lower rate
Cons: Resets mortgage term, closing costs 2–5%
0% APR Credit Card
For smaller home improvement projects under $10,000, a 0% APR credit card offers interest-free financing for 12–21 months.
Pros: 0% interest for promo period, rewards
Cons: Limited to credit limit, high rate after promo
FHA 203(k) Rehab Loan
For major renovations, an FHA 203(k) loan combines your mortgage and renovation costs into one loan. Requires a licensed contractor.
Pros: High loan amounts, low down payment
Cons: Complex process, requires contractor, FHA limits
Government Grants and Programs
The USDA Rural Repair and Rehabilitation program and HUD's HOME program offer grants and low-interest loans for home repairs to eligible homeowners.
Pros: May not need to repay (grants)
Cons: Income limits, geographic restrictions, long process
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WiseIQ Editorial Team
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Frequently Asked Questions
What is the best alternative to a HELOC? +
For most borrowers, a personal loan is the best HELOC alternative. It funds in 1–3 days, has no foreclosure risk, and offers fixed rates. For larger projects where you have significant equity, a home equity loan at a fixed rate may offer a lower rate.
Can I get a home improvement loan without equity? +
Yes. Personal loans don't require home equity. Lenders like SoFi and LightStream offer up to $100,000 for home improvement with no collateral required.
Is a personal loan or HELOC better for home improvement? +
A personal loan is better if you want speed (funds in 1–3 days vs. 2–6 weeks), a fixed rate, and no risk to your home. A HELOC may offer a lower rate if you have significant equity and can wait for approval.
What is the difference between a HELOC and a home equity loan? +
A HELOC is a revolving line of credit with a variable rate. A home equity loan is a lump-sum loan with a fixed rate. Both use your home as collateral. A home equity loan is better if you want payment predictability.
How much can I borrow with a personal loan for home improvement? +
Most personal loan lenders offer up to $35,000–$100,000 for home improvement. SoFi and LightStream offer up to $100,000. The amount you qualify for depends on your credit score and income.
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