Home loan vs personal loan: which is right for you?
When to use each, how the interest rates and repayment terms differ, and what it actually costs over time.
A home loan and a personal loan look superficially similar — you borrow a sum and repay it over time — but they're built for very different purposes. Choosing the wrong one can cost you tens of thousands of dollars over the life of the loan.
How they differ
Home loans are secured against the property you're buying, usually run for 25 to 30 years, and carry the lowest interest rates of any consumer credit product. Personal loans are usually unsecured (no asset behind them), have terms of 1 to 7 years, and charge much higher rates to compensate for the lender's risk.
When a home loan is the right choice
- Buying property
- Renovating (often via redraw or top-up)
- Refinancing existing home debt
- Investing in additional property
When a personal loan is better
- Buying a car (also see a car loan)
- Consolidating credit card debt
- Funding a wedding, holiday or medical bill
- Renovations under $30,000 where you don't want to refinance
The total cost over time
Use our loan calculators to compare. Borrowing $20,000 over 5 years at 11% personal-loan rates costs about $26,000 total. The same amount added to a 25-year home loan at 6.5% would cost $40,000+ in interest over its life — even though the monthly repayment looks smaller.
Practical tips before you apply
Check your credit score (free via Equifax or Experian). Pay down credit cards. Get a clear picture of your monthly expenses — lenders will scrutinise it. And always model the repayments on a calculator before signing.
Related calculators
Frequently asked questions
Which has the lower interest rate?
Home loans, because they're secured by your property. Variable home loans sit around 6–7%; personal loans run 9–18%.
Can I use a home loan top-up to consolidate debts?
Yes, but stretching short-term debt over 25 years can cost more in total interest. Use a loan calculator to compare.
How long does approval take?
Personal loans can settle within 1–3 days; home loan approvals typically take 2–6 weeks.
Do personal loans need a deposit?
No — they're unsecured. Lenders rely on income, credit score and existing debts.
Are there exit fees?
Exit fees on home loans were banned for new variable loans from July 2011, but break costs apply to fixed-rate loans.