How does a personal loan work when you secure it with equity?

Take advantage of the equity you've built up in your home by using it to finance your next purchase.

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Secured personal loans can be a great way to help you take your next step, whether it be to a new car, to home renovations or to any other large purchase. While car loans are the most common type of secured personal loans, a vehicle isn't the only way to guarantee a loan. If you own your own home and have built up some equity in it, you can use that equity as a guarantee on your next loan. Find out how this works in this guide.

How does a personal loan work when you secure it with equity?

A loan secured against your home works in the same way as other secured personal loans. When you apply you will need to provide details of your mortgage, your personal financial position and the reason you're taking out the loan. Your application will be assessed and if approved, you will be given a loan based on how much equity you hold and how much the lender thinks you can afford to repay.

Working out your equity

Home equity is essentially the difference between your property's value and any debt you hold against it. Typically, you'll be able to borrow up to 80% of your home's value minus the debt you hold against it. For example, if your home is worth $500,000 and you've paid off $300,000, you'll have $200,000 left on your mortgage. Here's how much you'll be able to borrow on a personal loan in that scenario:

  • 80% of a $500,000 home = $400,000
  • The amount of debt on the property = $200,000
  • Value - debt = $200,000

Do you need to apply with the same lender as your mortgage?

No, you don't. However, your lender may have secured personal loan options that allow you to use your home equity as a guarantee that you might want to consider. If you decide to apply with a different lender you will need to provide details of your mortgage, including your total loan and how much equity you hold.

The types of loans available when using your equity give you real flexibility:

  • Secured personal loan. This loan is secured to the amount of equity you hold but can be used for any purpose. it is given to you in a lump sum and you pay it back in instalments, usually over a period of one to seven years. As the loan is secured you can enjoy a more competitive rate.
  • Line of credit loan. As a continuous source of credit, you can draw on this loan as and when you need to. You'll have access to the amount of credit that you're secured for and be required to make regular repayments, and as you repay the credit it will become available again. The term for this kind of loan is usually ongoing.

Find out about investing in property with a home equity loan

What kind of purchases and investments can you make with an equity-secured personal loan?

While the loans themselves are secured, there aren't many restrictions on how you use your loan. You can use the money for:

  • Home renovations
  • New and used car purchases
  • Holidays
  • Large purchases, such as furniture

What are the features of this type of loan?

  • Competitive interest. Your loan is secured by a valuable and appreciating asset, your property, so you will usually get a competitive interest rate.
  • Flexible loan purpose. You can usually use the loan amount for whatever purpose you need.

Is there anything to consider before applying?

This is a risky type of loan should you default. If you fail to repay the loan the lender may be able to sell the property to pay the loan. Before you apply, consider how financially stable you are and if this is the right type of loan for you to take out.

A personal loan secured by your home equity can offer you a low interest rate as well as a flexible way to finance a personal purchase. However, as there are risks involved, remember to consider all of your options before you apply.

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More guides on Finder

Personal Loan Offers

Important Information*
Logo for Harmoney Unsecured Personal Loan
Harmoney Unsecured Personal Loan

You'll receive a fixed rate between 5.35% p.a. and based on your risk profile.
Apply for a loan up to $50,000 and repay your loan over 3 or 5 years terms.

Logo for ANZ Fixed Rate Personal Loan
ANZ Fixed Rate Personal Loan

You'll receive a fixed rate of 8.99% p.a.
Apply for up to $50,000 to use for a variety of purposes without needing to add security. Available to self-employed applicants.

Logo for NAB Personal Loan Unsecured Fixed
NAB Personal Loan Unsecured Fixed

You'll receive a fixed rate between 6.99% p.a. and 18.99% p.a. ( 7.91% p.a. to 19.83% p.a. comparison rate) based on your risk profile
An unsecured loan up to $55,000 you can use for a range of purposes and pay off over up to 7 years. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.

Logo for SocietyOne Unsecured Personal Loan
SocietyOne Unsecured Personal Loan

You'll receive a fixed rate between 6.99% p.a. and 20.49% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.

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6 Responses

    Default Gravatar
    BenjaminOctober 31, 2018

    I want to use my home equity to get a personal loan, what banks do this?

      Avatarfinder Customer Care
      JhezNovember 3, 2018Staff

      Hello Benjamin,

      Thank you for your comment.

      There are two types of loans available when using your equity. A secured personal loan and a line of credit loan.

      Kindly read the guides by clicking the type of loan above. It will give you tips on how to go about loans against your home equity. We have listed the banks and lenders that consider home equity. Please compare the loan products and apply by clicking the Go to Site button.

      Please make sure that you’ve read the relevant T&Cs or PDS of the loan products before making a decision and consider whether the product is right for you.

      Should you wish to have real-time answers to your questions, try our chatbox on the lower right corner of our page.


    Default Gravatar
    MarieSeptember 25, 2018

    I own my home ,on centerlink benefit aged 63 can i get a personal loan using my home

      Avatarfinder Customer Care
      JoshuaSeptember 30, 2018Staff

      Hi Marie,

      Thanks for getting in touch with Finder. I hope all is well with you. :)

      Yes, you can still get a personal loan using your home as security. This page provides more information about this type of loan. You may want to compare your options from our list of secured personal loans. On that page, you will see a table that allows you to conveniently compare your options. Once you found the right one for you, click on the “Go to site” green button to learn more or initiate your application.

      Please review the criteria, details of the loan product, and its conditions, then contact the lender directly to discuss your loan options and eligibility.

      I hope this helps. Should you have further questions, please don’t hesitate to reach out again.

      Have a wonderful day!


    Default Gravatar
    JohnOctober 16, 2016

    I have a cash deposit of $1000 need t0 borrow $2,500 to $3,000 I am the aged pension $900 per fortnight Have $ 15,ooo in furniture assets this is NOT a formal loan application ,information only !

      Avatarfinder Customer Care
      ElizabethOctober 17, 2016Staff

      Hi John,

      As a financial comparison service, we don’t fund the loans ourselves. If you’re looking to apply, you can select the “Go to Site” when you find a lender you want to apply with. Most lenders require the security you offer to be home equity or a vehicle, but you may be able to search for some alternative lenders willing to use your furniture. Please check this list of lenders that consider retired applicants.

      Hope this helps,


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