Cash-Out Refinance vs Personal Loan
Last updated July 2026
Cash-Out Refinance
Replace your existing mortgage with a bigger one and take the difference in cash
Advantages
- Fixed rate on the full new mortgage amount
- Simpler than juggling two liens
- Cash proceeds are a lump sum for any purpose
- Interest may be tax-deductible for home improvements
- If current rates are below your existing rate, you can lower your monthly payment while pulling cash
Drawbacks
- Replaces your existing mortgage rate, dangerous if current rates are above yours
- Full closing costs (typically 2-5% of the loan amount)
- Resets your mortgage term to 15-30 years
- Higher monthly payment if you increase the loan amount
Personal Loan
Unsecured fixed-rate installment loan based on credit
Advantages
- No collateral required; your home is not at risk
- Faster funding (as soon as same day for prime borrowers)
- No closing costs (though some lenders charge origination fees)
- No appraisal or home equity needed
- Simpler application process
Drawbacks
- Higher rates than home equity loans (typically 8-25% APR)
- Lower loan amounts (typically $1K-$100K)
- Shorter repayment terms (2-7 years typical)
- Interest never tax-deductible
Cash-Out Refinance and Personal Loan both play in home equity financing, but they're aimed at different buyers. Cash-Out Refinance is built for homeowners whose current mortgage rate is above market and who want a large lump sum. Personal Loan is built for borrowers who need $1K-$50K quickly without risking their home. Which one fits depends on which of those descriptions sounds more like you.
Feature Comparison
| Feature | Cash-Out Refinance | Personal Loan |
|---|---|---|
| Loan Structure | Replaces first mortgage with new, larger loan | Unsecured fixed-rate installment loan |
| Interest Rate | Fixed; current market rate | Fixed; typically 8-25% APR |
| Maximum Amount | -- | $1,000-$100,000 depending on lender |
| Collateral Required | -- | None |
| Approval Time | -- | Same-day to 5 business days typical |
| Tax Deduction | -- | None |
| Credit Impact | -- | Reported as unsecured installment loan |
| Use of Proceeds | -- | Any purpose |
| Draw Period | N/A, lump sum at closing | -- |
| Repayment Term | 15-30 year fixed term | -- |
| Closing Costs | 2-5% of new loan amount | -- |
| Loan Terms | Standard mortgage terms | -- |
| First Mortgage Impact | Replaced entirely | -- |
| Best Use Case | Large one-time cash needs when current rates are favorable | -- |
Personal Loan Wins
Personal Loan takes it overall (8/10 vs 7/10), but Cash-Out Refinance is still the sharper pick for homeowners whose current mortgage rate is above market and who want a large lump sum.
Personal Loan's standout strength: No collateral required; your home is not at risk. Its biggest drawback (higher rates than home equity loans (typically 8-25% APR)) is easier to live with than Cash-Out Refinance's (replaces your existing mortgage rate, dangerous if current rates are above yours). Cash-Out Refinance isn't out of the running though — its own standout strength is fixed rate on the full new mortgage amount. If you fit the profile of homeowners whose current mortgage rate is above market and who want a large lump sum, that alone can flip the decision.
Related Comparisons
HELOC vs Cash-Out Refinance
Two ways to tap equity, a second lien with revolving credit or a full mortgage replacement.
Home Equity Loan vs Cash-Out Refinance
Both give you a lump sum against your equity, but one adds a second lien and the other replaces your mortgage.
Home Equity Loan vs Personal Loan
Secured against your home or unsecured against your credit, which financing fits your borrowing need?