January 6, 2023

Personal Loans vs Home Equity Loans: How to Choose the Right One for Your Needs

woman and man listening to advice from a mortgage broker, across the table

Perhaps nothing is more personal than people’s considerations regarding how they manage their money. Everybody has their own unique circumstances in their career, as well as their own financial and lifestyle goals.

There isn’t merely one universal approach everybody should take. However, some overarching facts bear on the topic that people should know before making a choice.

Read on for more information about the differences between personal loans versus home equity loans, so you can make a well-informed decision.

What’s Different About Them?

Personal loans and home equity loans are both one-time, lump-sum payments to be paid back in installments over a specified time. However, personal loans can be secured or unsecured by collateral, making them a much broader and varied category.

In contrast, home equity loans are always secured loans where the borrower’s home is the collateral. Personal loans may have a less intense approval process since there tends to be less at stake, making them easier and more straightforward to obtain.

Home equity loans ordinarily take longer to get approved, but because a home is the collateral and because a property is one of the most reliable investments there are, they tend to offer lower interest rates and a higher loan amount.

Keep in mind that loans from Burke Financial can be approved quickly, as we’ll do our utmost to expedite the process. That way, homeowners can get access to large sums of money at great rates when they need it most! If there’s a leak in your roof, you don’t want to wait around for a home equity loan to get approved or get a quick personal loan at unnecessarily high-interest rates.

What to Use the Loans For

Canada is very much a free country! There’s no law dictating how people must use their money. Burke Financial will never forbid borrowers from using their money however they please, but financial advisers tend to have a few guiding principles that keep your finances healthy and help you steer clear of catastrophe.

Using your home’s equity for purchasing an investment property makes sense since you’re parlaying the money you’ve put into your first home to generate money from a second one that will likely only grow in value. There’s a major difference between spending the borrowed money indulgently on luxury cars or fancy vacations and using it to grow and stabilize your finances.

woman on bed tracking money on a phone and laptop

Using this money to travel means you’re paying more for the trip than it costs since you’ll need to pay the borrowing costs in addition to things like a hotel and flight. In contrast, borrowing money to reinvest in your home or to purchase another one can offset the borrowing costs or even make you a net profit.

One of the main reasons that loans for home renovations are common is that they reinvest money into your home, which is the collateral you put up to borrow the money.

Which Is Better for Rehabilitating Credit?

People also tend to use their home’s equity to help improve their finances by consolidating several unwieldy loans into a single debt. Sometimes, managing different payments can be challenging, as is paying larger sums when one slips through the cracks and grows.

If you’re in a position to build wealth through home equity, by all means, do it. Many people use home equity loans to rehabilitate their credit because using your home as collateral gets you the best interest rate. People need healthy credit so they can borrow more long-term.

A personal loan may have interest rates lower than credit cards, but they’ll be significantly higher than those associated with home equity loans, HELOCs, or second mortgages. The industry-leading team at Burke Financial, a top-rated firm accredited by the Better Business Bureau, works with clients across Ontario to help thousands save money through debt relief strategies.

If you’re struggling to navigate debts from multiple sources or face challenges from your financial institution, the small steps you make today could make a huge difference.

What is the Right Way to Leverage Home Equity?

Once you’ve determined that a personal loan won’t benefit you as much as leveraging your home’s equity will, there are still other choices to make. It could very well be that a HELOC is better suited to your situation than Ontario home equity loans, though it varies from case to case.

There is a lot more than merely one thing called a “home equity loan.” Our financial experts will work with you to free up as much as 85% of your home’s equity. However, there are different ways to do it, and there’s a huge range within each option.

Burke Financial is proud to offer in-depth, customized help for each client. After an independent assessor determines your home’s current market value, you’ll receive the loan amount. But the details afterwards can change depending on several factors.

We can guide you through home equity loans, HELOCs, and second mortgages, so you pick the right way to best leverage your home. Then, once you’ve decided, we’ll walk you through that process, too.

We’re proud to work hard with each client so we understand their situation and their goals. After hearing your side, we’ll give you our honest, in-depth professional assessment and the benefit of all our industry contacts. Between the guidance and the connections, your finances will be sound and healthy in no time.

People all over are looking to bolster their finances right now as interest rates and inflation soar. Life may be getting more expensive, but people still need to buy life’s essentials, and they need to find a healthy path forward.

It doesn’t matter what level of debt, credit, or income you currently have. If you’re unsure about how best to borrow money, speak to the mortgage experts at Burke Financial today to answer your questions and improve your finance’s health today.


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