When you need to borrow $20-100k for a renovation, car, or unexpected expense, the obvious-looking choice is to top up your home loan at the cheap home-loan rate. Headline maths supports it: 6% home loan rate beats 11% personal loan rate every time, right? Not quite. The trap is the term. A home-loan top-up is amortised over your remaining home loan term — typically 20-30 years. A personal loan runs 3-7 years. The cheaper rate compounded over 30 years often costs more in TOTAL interest than the higher rate compounded over 5.

Numerical example: $30,000 borrowed. As home-loan top-up at 6% over 20 years: $215/month, $51,600 total, $21,600 interest. As personal loan at 11% over 5 years: $652/month, $39,150 total, $9,150 interest. Despite the personal loan rate being almost double, the total interest cost is less than half — because you're done after 5 years instead of carrying it for 20.

The fix when topping up the home loan is to commit to making extra repayments equal to what the personal loan payment would have been ($652/month in the example). Set the offset account to deduct that amount and you'll pay off the top-up in roughly the same 5 years. Without that discipline, the home loan top-up is often the worse choice. The calculator above lets you stress-test the trade-off with your actual numbers. For broader debt strategy see our Debt Payoff Calculator.