Bitcoin Leverage Types Compared: HELOC vs Margin Loan vs Personal Loan
Not all leverage is created equal. The interest rate, collateral requirement, forced liquidation risk, and tax treatment vary dramatically across loan types. This guide compares every major leverage strategy for buying Bitcoin so you can narrow down which ones deserve a deeper look with your own numbers.
Complete Leverage Comparison Table
| Strategy | Rate | Rate Type | Collateral | Liquidation Risk | Min CAGR (5yr) |
|---|---|---|---|---|---|
| HELOC | 7-9% | Variable | Home | None | ~19-23% |
| Cash-Out Refi | 6-8% | Fixed | Home | None | ~17-21% |
| Margin Loan | 5-10% | Variable | Stocks | Margin call | ~16-25% |
| BTC-Backed | 8-14% | Fixed | Bitcoin | LTV liquidation | ~21-32% |
| 401k Loan | ~5% | Fixed | 401k balance | None | ~15-16% |
| Personal Loan | 8-20% | Fixed | None | None | ~21-40%+ |
| SBLOC | 5-8% | Variable | Stocks | Maintenance call | ~16-21% |
Min CAGR (5yr) = minimum Bitcoin CAGR needed to break even over 5 years at the midpoint of the rate range. Actual requirements depend on your specific rate and terms.
Key Trade-Offs to Consider
Rate vs. liquidation risk: Lower rates (margin loans, SBLOCs) often come with forced liquidation risk. You could be forced to sell Bitcoin at the worst possible time during a drawdown. Higher rates (HELOC, personal loan) often have no forced liquidation, letting you ride out bear markets.
Fixed vs. variable: Variable rates (HELOC, margin, SBLOC) are often lower today but can increase. A 7% HELOC could become 10%+ if rates rise. Fixed-rate options (cash-out refi, personal loan) lock in your cost but start higher. Your break-even CAGR is certain with fixed rates and uncertain with variable.
Collateral type matters: Putting your home at risk (HELOC/refi) is a fundamentally different risk than pledging stocks (SBLOC) or Bitcoin itself (BTC-backed). Consider what you can afford to lose access to during a worst-case scenario.
Time horizon alignment: Short-term loans (personal loans, 3-5 year terms) need higher CAGR to break even. Long-term loans (30-year refi, 10-year HELOC repayment) give compound growth more time to work. Match your loan term to your conviction level.
Which Strategy Is Right for You?
You own a home with 20%+ equity
Start with HELOC or cash-out refinance. These offer the best rate-to-risk ratio for most homeowners. Choose HELOC for flexibility (DCA) or cash-out refi for rate certainty.
You have a large stock portfolio
Consider SBLOC or margin loan. Avoids selling stocks (and triggering capital gains) but introduces liquidation risk during market downturns.
You already hold Bitcoin
Bitcoin-backed loans let you borrow against your BTC without selling (avoiding capital gains). But be cautious of recursive leverage — a drawdown hits both your collateral and your new position.
You have high conviction but few assets
A personal loan requires no collateral, but rates are significantly higher (8-20%). This means Bitcoin needs much higher CAGR to break even. Only viable if you believe in 25%+ CAGR over your loan term.
Frequently Asked Questions
What is the cheapest way to leverage into Bitcoin?
Which leverage type has the lowest risk?
Can I combine multiple leverage types?
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Disclaimer: This content is for informational and educational purposes only. It is not financial, investment, tax, or legal advice. Using leverage to purchase Bitcoin carries significant risk. Always consult a qualified financial advisor.