Cash-Out Refinance vs Personal Loan: Best Way to Access Cash [2026]
By Mo Abdel, NMLS #1426884 | Published February 17, 2026
The bottom line: A cash-out refinance offers rates of 6.5-7.5% with access to $50,000-$500,000+ but takes 30-45 days, costs 2-5% in closing fees, and puts your home at risk. A personal loan charges 8-36% interest with a maximum of $50,000-$100,000 but funds in 1-5 days with no closing costs and no home risk. Choose based on amount needed, urgency, and risk tolerance. For many homeowners, a HELOC provides the best of both worlds.
Quick Answer: Cash-Out Refinance vs Personal Loan
- Cash-out refi rate (2026): 6.5-7.5% fixed (30-year term)
- Personal loan rate (2026): 8-36% fixed (2-7 year term)
- Cash-out refi closing costs: 2-5% of total loan amount
- Personal loan fees: $0 closing costs; 0-8% origination fee possible
- Funding speed: Cash-out 30-45 days vs personal loan 1-5 days
- Max amount: Cash-out up to 80% LTV vs personal loan $50K-$100K typical max
- Home risk: Cash-out YES (secured by home) vs personal loan NO (unsecured)
- Best for large amounts: Cash-out refinance. Best for speed: Personal loan
Understanding the Fundamental Difference: Secured vs Unsecured Borrowing
The core difference between a cash-out refinance vs personal loan comes down to one word: collateral. A cash-out refinance is a secured loan backed by your home. A personal loan is unsecured debt backed only by your promise to repay. This single distinction drives every other difference between these two products: rates, amounts, timelines, costs, and risk profiles.
Because a cash-out refinance gives the lender the right to foreclose if you default, they accept significantly more risk on their side, which translates to lower interest rates for you. Personal loan lenders have no collateral to seize, so they charge higher rates to compensate for greater default risk. The spread between the two is substantial: the average cash-out refinance rate in February 2026 is 6.9%, while the average personal loan rate is 12.4%, a gap of 5.5 percentage points.
As a wholesale mortgage broker who processes both types of transactions, I help homeowners understand exactly when the cost savings of a cash-out refinance justify the additional complexity and risk, and when a personal loan is the smarter move despite the higher rate.
Complete Side-by-Side Comparison: Cash-Out Refinance vs Personal Loan
| Feature | Cash-Out Refinance | Personal Loan |
|---|---|---|
| Interest Rate (2026) | 6.5-7.5% fixed | 8-36% fixed |
| Loan Type | Secured (home as collateral) | Unsecured (no collateral) |
| Typical Amount | $50,000-$500,000+ | $1,000-$100,000 |
| Repayment Term | 15 or 30 years | 2-7 years |
| Closing Costs | 2-5% of loan amount | $0 (0-8% origination possible) |
| Funding Timeline | 30-45 days | 1-5 business days |
| Appraisal Required? | Yes ($400-$700) | No |
| Home Risk | Yes (foreclosure risk) | No |
| Tax Deductible? | Only for home improvements | No |
| Credit Score Minimum | 620 (best rates at 740+) | 580+ (best rates at 720+) |
| Replaces Mortgage? | Yes (new 30-year term) | No (separate debt) |
| Documentation | Full (income, assets, appraisal) | Minimal (income verification) |
The Real Cost: Break-Even Analysis and Total Interest Comparison
The lower interest rate on a cash-out refinance does not automatically make it cheaper. Closing costs and term length significantly affect total cost. Here is a detailed cost comparison for borrowing $50,000:
| Cost Component | Cash-Out Refi (7% / 30yr) | Personal Loan (12% / 5yr) | Personal Loan (12% / 3yr) |
|---|---|---|---|
| Amount Borrowed | $50,000 | $50,000 | $50,000 |
| Closing Costs / Fees | ~$8,000-$12,000* | $0-$2,500 | $0-$2,500 |
| Monthly Payment | $333/mo | $1,112/mo | $1,661/mo |
| Total Interest Paid | $69,720 (over 30 years) | $16,720 (over 5 years) | $9,796 (over 3 years) |
| Total Cost (principal + interest + fees) | $127,720+ | $69,220 | $62,296 |
*Cash-out refinance closing costs are based on the total new loan amount, not just the $50,000 cash-out portion. A $350,000 existing mortgage refinanced to $400,000 incurs closing costs on the full $400,000. Rates and costs are illustrative for comparison purposes only.
Critical Insight: The 30-Year Trap
The cash-out refinance monthly payment looks attractively low at $333/month vs $1,112/month for the personal loan. But you are paying that $333 for 30 years, resulting in $69,720 in total interest on $50,000 borrowed. If you can afford the higher personal loan payment and plan to pay off the debt within 3-5 years, the personal loan is actually cheaper despite the higher interest rate. The cash-out refinance only wins financially when you truly need the 30-year term or borrow large enough amounts to justify the closing costs.
Break-Even Point: When Cash-Out Refinance Becomes Cheaper
The break-even analysis depends on how long you keep the new mortgage. Because cash-out refinances carry significant upfront closing costs, you need to hold the loan long enough for the monthly savings (from the lower rate) to exceed those costs.
| Amount Borrowed | Closing Costs (est.) | Monthly Savings vs 12% Personal | Break-Even (months) |
|---|---|---|---|
| $25,000 | ~$6,000-$8,000 | ~$389/mo | 15-21 months |
| $50,000 | ~$8,000-$12,000 | ~$779/mo | 10-15 months |
| $100,000 | ~$10,000-$15,000 | ~$1,558/mo | 6-10 months |
| $200,000 | ~$12,000-$20,000 | ~$3,116/mo | 4-6 months |
Key takeaway: The larger the amount borrowed, the faster the cash-out refinance pays for itself. Borrowing $100,000+ through a cash-out refinance almost always makes financial sense if you plan to keep the mortgage for more than 6-10 months. For amounts under $25,000, the closing costs make a personal loan more cost-effective in most scenarios.
When a Cash-Out Refinance Is the Right Choice
A cash-out refinance is the optimal borrowing strategy when these conditions align:
Choose Cash-Out Refinance When:
- You need $50,000 or more: The rate advantage compounds significantly at larger amounts, easily justifying closing costs
- You can wait 30-45 days: The funding timeline works for planned expenses like renovations, investments, or debt consolidation
- You can improve your current mortgage rate: If current rates are lower than your existing rate, you benefit twice: lower rate plus cash out
- You want one simplified payment: Replacing your mortgage consolidates everything into a single monthly payment
- You plan to stay in your home 5+ years: Longer holding periods amortize the closing costs over more time
- The funds are for home improvements: Interest may be tax-deductible, and the improvements increase your home value
Real Scenario: The Nguyen Family
Home value: $850,000 | Current mortgage: $420,000 at 7.25% | Need: $120,000 for kitchen/bath remodel. Cash-out refinance to $540,000 at 6.75% actually lowers their monthly payment by $47 while giving them $120,000 cash. The lower rate on the full balance offsets the increase from the larger loan amount. Total savings vs a personal loan at 11.5%: approximately $38,000 over 5 years, plus the improvement adds an estimated $95,000 in home value.
When a Personal Loan Is the Smarter Move
Despite the higher interest rate, a personal loan is the better financial decision in many common situations:
Choose a Personal Loan When:
- You need less than $25,000: Closing costs on a cash-out refinance make small amounts prohibitively expensive
- You need money fast (1-5 days): Medical emergencies, time-sensitive opportunities, or urgent repairs
- You do not want to risk your home: Personal loans are unsecured; defaulting damages credit but does not trigger foreclosure
- You will pay it off in 2-3 years: Total interest on a short-term personal loan is often less than cash-out closing costs alone
- You have a great existing mortgage rate: Replacing a 3-4% mortgage from 2020-2021 with a 6.5-7.5% cash-out refinance costs significantly more over the mortgage's life
- You are near the end of your mortgage: Restarting a 30-year term when you have 10 years left makes no financial sense
- You are a renter or have little equity: Personal loans do not require homeownership or equity
Real Scenario: The Rodriguez Emergency
Needed: $15,000 for unexpected medical bills. Current mortgage: $380,000 at 3.25% (locked in 2021). A cash-out refinance to $395,000 at 6.75% would increase their rate on the entire $380,000 balance, costing an additional $247/month in interest on existing principal alone, or $88,920 over 30 years. Instead, a personal loan at 10.5% for 3 years costs $2,518 in total interest. The personal loan saves them over $86,000 in total costs. Decision: personal loan, hands down.
The Third Option: When a HELOC Beats Both
Many homeowners overlook the HELOC (Home Equity Line of Credit) when comparing cash-out refinance vs personal loan. A HELOC often provides the ideal middle ground:
| Feature | Cash-Out Refi | Personal Loan | HELOC |
|---|---|---|---|
| Rate (2026) | 6.5-7.5% fixed | 8-36% fixed | 6.5-8.5% variable |
| Closing Costs | 2-5% of loan | $0 | $0-$500 |
| Funding Speed | 30-45 days | 1-5 days | 2-4 weeks |
| Keeps First Mortgage? | No (replaces it) | N/A | Yes |
| Access Style | One-time lump sum | One-time lump sum | Revolving (draw as needed) |
| Home at Risk? | Yes | No | Yes |
| Best Amount Range | $75,000+ | $1,000-$25,000 | $25,000-$200,000 |
A HELOC is the best choice when: You have a favorable existing mortgage rate you do not want to lose, need $25,000-$200,000, want low closing costs, need flexible ongoing access rather than a lump sum, and can accept a variable interest rate. For homeowners who locked in 3-4% mortgage rates during 2020-2021, a HELOC preserves that rate while still tapping equity at competitive rates.
Decision Framework: Choose the Right Option for Your Situation
Use this framework to quickly determine which borrowing option fits your needs:
By Amount Needed
- Under $10,000: Personal loan (closing costs make mortgage products impractical)
- $10,000-$25,000: Personal loan or HELOC (depends on timeline and existing rate)
- $25,000-$75,000: HELOC (best balance of cost and flexibility)
- $75,000-$200,000: HELOC or cash-out refi (depends on current mortgage rate)
- Over $200,000: Cash-out refinance (maximizes available funds at lowest rate)
By Urgency
- Need money today: Personal loan (some fund same day)
- Need money this week: Personal loan (1-5 day average)
- Can wait 2-3 weeks: HELOC (2-4 week closing)
- Can wait 1-2 months: Cash-out refinance or HELOC
- No urgency: Cash-out refinance (if it makes rate sense)
By Credit Score
- 760+: Cash-out refi (maximum rate advantage over personal loan)
- 720-759: Cash-out refi or HELOC (still significant rate advantage)
- 680-719: HELOC (qualify for equity products at competitive rates)
- 620-679: Cash-out refi possible; personal loan rates high
- Below 620: Personal loan only option (no equity products available)
By Current Mortgage Rate
- Above 7%: Cash-out refi (may lower your rate AND get cash)
- 6-7%: Cash-out refi or HELOC (rate neutral territory)
- 5-6%: HELOC strongly preferred (protect your rate)
- Below 5%: HELOC or personal loan (never replace a sub-5% mortgage)
- Below 4%: HELOC or personal loan ONLY (protect that rate at all costs)
February 2026 Borrowing Rate Data
| Product | Rate Range | Average Rate | Best Rate (760+ score) |
|---|---|---|---|
| Cash-Out Refinance (30yr) | 6.5-7.5% | 6.9% | 6.5% |
| Cash-Out Refinance (15yr) | 5.9-6.8% | 6.3% | 5.9% |
| HELOC | 6.5-8.5% | 7.5% | 6.5% |
| Home Equity Loan | 7.0-9.0% | 8.0% | 7.0% |
| Personal Loan | 8.0-36.0% | 12.4% | 8.0% |
| Credit Card | 18.0-29.9% | 22.8% | 18.0% |
Rates are approximate market averages for February 2026. Actual rates depend on credit score, loan-to-value ratio, income verification, and lender. For illustration only.
People Also Ask: Cash-Out Refinance vs Personal Loan
Which is cheaper: cash-out refinance or personal loan?
On a per-month basis, cash-out refinances are cheaper because payments are spread over 30 years at a lower rate. However, on a total-cost basis, it depends on the amount and payoff timeline. For $50,000 borrowed, a cash-out refinance at 7% over 30 years costs $69,720 in total interest, while a personal loan at 12% paid off in 3 years costs only $9,796 in interest. For amounts over $75,000 held long-term, the cash-out refinance is typically cheaper. For smaller amounts paid quickly, the personal loan wins despite the higher rate.
Can I get a cash-out refinance with bad credit?
Cash-out refinances require a minimum credit score of 620 for conventional loans, though FHA cash-out refinances may be available at 580+ (limited to 80% LTV). With a score below 700, expect higher rates that reduce the advantage over a personal loan. Some non-QM lenders offer cash-out refinances to borrowers with lower scores or non-traditional income documentation, but rates will be higher. A wholesale mortgage broker can access specialized lenders that banks do not offer directly.
Does a cash-out refinance hurt my credit score?
A cash-out refinance triggers a hard credit inquiry (temporary 5-10 point drop) and replaces your existing mortgage with a new account, resetting the account age. However, it can improve your credit utilization if you use the funds to pay off credit cards or other revolving debt. A personal loan also triggers a hard inquiry and adds an installment account. Neither has a significant long-term negative impact when payments are made on time.
How much equity do I need for a cash-out refinance?
Most conventional cash-out refinances require you to maintain at least 20% equity after the transaction, meaning a maximum loan-to-value (LTV) ratio of 80%. On a $600,000 home, the maximum new mortgage would be $480,000. If you owe $350,000, you could access up to $130,000 in cash. FHA cash-out refinances also cap at 80% LTV. VA cash-out refinances allow up to 100% LTV for eligible veterans, making them a powerful option for qualifying borrowers.
What are the best uses for a cash-out refinance vs personal loan?
Cash-out refinance best uses: Major home renovations ($50K+), large debt consolidation, investment property down payments, and situations where you can also improve your mortgage rate. Personal loan best uses: Medical bills, small home repairs, car repairs, weddings, moving expenses, and any situation requiring fast funding under $25,000. Avoid using either for depreciating assets or consumption spending when possible.
Can I do a cash-out refinance on an investment property?
Yes, but the terms are stricter. Investment property cash-out refinances typically require 25-30% equity (vs 20% for primary residence), carry rates 0.5-1.0% higher, and require stronger documentation of rental income. Maximum LTV is usually 70-75%. Personal loans cannot be used for investment property purchases. For investors, a DSCR (Debt Service Coverage Ratio) cash-out refinance qualifies based on rental income rather than personal income, which many real estate investors prefer.
Frequently Asked Questions: Cash-Out Refinance vs Personal Loan
Is a cash-out refinance better than a personal loan?
A cash-out refinance is better when you need a large amount ($25,000+), want the lowest possible interest rate (6.5-7.5% vs 8-36% for personal loans), and can wait 30-45 days for funding. A personal loan is better for smaller amounts, urgent needs (funded in 1-5 days), or when you do not want to put your home at risk. The right choice depends on the amount needed, urgency, and your risk tolerance.
What is the interest rate on a cash-out refinance vs personal loan in 2026?
In February 2026, cash-out refinance rates range from 6.5% to 7.5% for borrowers with good credit and sufficient equity. Personal loan rates range from 8% to 36%, with the average being 12.4% for a 24-month term. The rate gap means a $50,000 cash-out refinance at 7% costs roughly $332/month over 30 years, while a $50,000 personal loan at 12% costs $1,112/month over 5 years.
How long does a cash-out refinance take compared to a personal loan?
A cash-out refinance typically takes 30-45 days from application to funding, sometimes longer if appraisal or title issues arise. A personal loan can be funded in as little as 1 business day with online lenders, with most applications approved and funded within 3-5 business days. If you need cash quickly, a personal loan is significantly faster.
Can I lose my house with a cash-out refinance?
Yes. A cash-out refinance replaces your existing mortgage with a new, larger mortgage. If you fail to make payments on the new mortgage, the lender can foreclose on your home. This is the fundamental risk of any secured borrowing against your property. A personal loan is unsecured, meaning your home is not at risk if you default, though your credit score will be severely damaged.
What are the closing costs on a cash-out refinance?
Cash-out refinance closing costs typically range from 2% to 5% of the total new loan amount, not just the cash-out portion. On a $400,000 refinance, that means $8,000 to $20,000 in closing costs including appraisal, title insurance, origination fees, and recording fees. Personal loans generally have no closing costs, though some charge origination fees of 1-8% of the loan amount.
How much cash can I get from a cash-out refinance?
Most lenders allow you to borrow up to 80% of your home value minus your existing mortgage balance. For example, if your home is worth $700,000 and you owe $350,000, you could access up to $210,000 ($700,000 x 80% = $560,000 minus $350,000). Some lenders allow up to 90% LTV for qualified borrowers. Personal loans typically max out at $50,000-$100,000.
Is cash-out refinance interest tax deductible?
Cash-out refinance interest is tax-deductible only when the funds are used to buy, build, or substantially improve the home securing the loan. Under the Tax Cuts and Jobs Act, interest on cash-out funds used for debt consolidation, education, medical expenses, or other purposes is not deductible. The deduction limit is $750,000 in total qualified mortgage debt. Personal loan interest is generally not tax-deductible for any purpose.
Does a cash-out refinance reset my mortgage term?
Yes. A cash-out refinance replaces your existing mortgage with a brand new loan, typically a new 30-year term. If you were 10 years into a 30-year mortgage, you now restart the clock at year one of a new 30-year mortgage. This means you pay interest for a longer total period. Some borrowers choose a 15 or 20-year term to offset this effect, though monthly payments will be higher.
What credit score do I need for a cash-out refinance vs personal loan?
Cash-out refinances typically require a credit score of 620 or higher, with the best rates available to borrowers scoring 740+. Personal loans are available to borrowers with scores as low as 580 from some lenders, but rates for lower credit scores can exceed 25-36%. Borrowers with excellent credit (760+) see the largest rate advantage from cash-out refinances compared to personal loans.
When should I choose a personal loan over a cash-out refinance?
Choose a personal loan when you need less than $25,000, need funds within 1-5 days, do not want to pay closing costs, want to avoid putting your home at risk, are close to paying off your current mortgage, or when a cash-out refinance would increase your mortgage rate above your current rate. Personal loans are also better for short-term borrowing needs where the debt will be repaid within 2-5 years.
Can I get a personal loan and a cash-out refinance at the same time?
Technically yes, but the personal loan will increase your debt-to-income ratio, which could disqualify you for the cash-out refinance or reduce the amount you can borrow. If you need both, apply for the cash-out refinance first since it takes longer, then apply for the personal loan after the refinance closes. Lenders will verify your DTI is within acceptable limits for each product.
Is a HELOC better than both a cash-out refinance and a personal loan?
A HELOC is often the best middle ground. It offers rates close to cash-out refinances (6.5-8.5%), closes faster (2-4 weeks), has minimal closing costs ($0-$500), and provides flexible revolving access instead of a lump sum. The main trade-off is variable rates and maintaining two mortgage payments. For many homeowners, a HELOC beats both cash-out refinancing and personal loans when the amount needed is $25,000-$150,000.
Expert Summary: Making the Right Borrowing Decision
The cash-out refinance vs personal loan decision ultimately comes down to three factors: how much you need, how fast you need it, and whether you are willing to put your home on the line. For large amounts ($75,000+) with no urgency, the cash-out refinance's lower rate creates substantial savings. For smaller amounts or urgent needs, the personal loan's speed and simplicity make it the practical choice despite higher rates.
Do not overlook the HELOC as a third option. For the $25,000-$200,000 range, a HELOC provides near-mortgage rates with minimal closing costs, faster funding than a cash-out refinance, and the flexibility to draw only what you need. Most importantly, a HELOC preserves your existing mortgage rate, which is critical for homeowners who locked in rates below 5% during 2020-2021.
As a wholesale mortgage broker with access to over 200 lenders, I provide multiple options and run the exact numbers for your situation. Whether you need a cash-out refinance, HELOC, or guidance on when a personal loan makes more sense, I will show you the total cost comparison so you can make the most informed decision.
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Mo Abdel | (949) 822-9662
NMLS #1426884 | Lumin Lending NMLS #2716106