Considering a HELOC to pay off credit card debt? Explore the pros and cons to decide if it's a smart financial move for your situation.
If you’re struggling to chisel away at (or simply stay on top of) credit card debt, you’re not alone. In fact, 50 percent of Americans in a recent Bankrate survey said that they routinely carry a credit card balance from month to month. Of these respondents, 36 percent had more in credit card debt than they did in their emergency savings account.1
If you’re like these respondents and the many other Americans dealing with credit card debt, you may be wondering if you should use a HELOC to pay this debt down. But despite the debt-consolidation benefits a home equity line of credit can provide, you may want to think twice before going this route.
Read on as we weigh the pros and cons of using a HELOC to pay off credit card debt.
What is a HELOC? Originally coming to prominence in the 1970s, home equity lines of credit have surged in popularity in the years since 2021 as more homeowners look to capitalize on inflated property values (and their newfound equity.) Recent interest rate hikes have also motivated more borrowers to turn to their home equity rather than higher-interest options, like personal loans and credit cards.2
Like home equity loans, HELOCs allow homeowners to borrow against the equity they’ve accrued in their property over years of mortgage payments. Instead of doling out funds in a single lump sum, home equity lines of credit allow borrowers to draw from a credit line: withdrawing funds as they please for the duration of the draw period, making interest-only payments until repayment begins. Once repayment begins, no more funds may be withdrawn, and monthly payments shift to include the principal and interest.
There are many uses for the home equity line of credit, ranging from costly home improvement projects to educational expenses. One of the most common uses for the HELOC is debt consolidation, as this tool allows users to trade several sources of debt and multiple interest rates for a single one.
There’s a reason many homeowners use HELOCs to pay off credit card debt. Chief among these are reduced interest rates and financial flexibility. Consider these compelling pros when deciding if you should use a home equity line of credit to wipe out your credit card debt.
As of January 2025, the average credit card interest rate sits at a whopping 24 percent.3 Compare this with the average HELOC interest rate, a variable rate hovering around seven percent, and the home equity line of credit can begin to look like a great low-interest alternative to plastic.
We mentioned earlier that HELOCs can be a more flexible option than home equity loans. In the context of a home improvement project—where budgets can stretch and financing may need to do the same—this is a clear advantage. But how does this flexibility help pay off credit card debt?
Let’s say your credit card debt is just on the other side of being manageable. In this case, a HELOC can enable you to access only the equity you need to get your debt under control. This prevents you from borrowing too much while helping you develop the habits needed to prevent credit card debt from popping back up.
You can then reassess your situation and decide whether to pay off your debt for good or preserve your equity and fight debt solo.
The pros sound pretty good. But what are the cons of using a HELOC to pay off debt, and are they enough to keep you from including a HELOC in your debt-consolidation strategy?
The biggest con of using a home equity line of credit to pay off credit card debt is the risk of losing your home in the process.
Credit card debt is what’s known as unsecured debt, meaning it’s not backed by collateral. A HELOC is secured, and the collateral it’s backed by is your home. This is what grants the home equity line of credit its potentially far lower interest rates, but it also means that defaulting on the loan could earn you more than some incessant collection calls—potentially even landing you in foreclosure.
A few thousand dollars in credit card debt might not seem like such a big deal anymore compared to the thought of putting your house on the line.
HELOCs and home equity loans are often called second mortgages. Like primary mortgages, they typically carry hefty closing costs, eating into your potential savings compared to high-interest credit card debt. Fortunately, these closing costs tend to be lower than that of a primary mortgage, but it’s still worth doing the math to understand just how much a HELOC will cost you.
The flexibility of a credit line can be both a blessing and a curse. On one hand, it allows you to borrow what you need, then reevaluate your debt-repayment strategy before borrowing more (if needed.) On the other hand, it puts potentially tens of thousands of dollars just within reach—a source of great temptation for those who may already be prone to overspending.
Like sticking to a budget to achieve long-term financial goals, paying off credit card debt requires behavioral change. While a HELOC can provide a quick fix, it might benefit you to explore financial counseling to better understand your spending habits and avoid falling into debt in the future.
Using a home equity line of credit to pay off credit card debt can be a risky proposition. It can also be a strategic step toward thousands of dollars in interest savings. So, when does it make the most sense to use a HELOC?
A weighty balance on a single credit card can be difficult to manage. Balances on several cards can feel like a full-time job. Consolidating this debt with a HELOC can not only help you save money in interest but also ease financial stress that can creep into other aspects of your life.
A home equity line of credit can be a debt-consolidation asset even if you’ve already begun repaying your credit card debt. And it can help you better adhere to repayment plans, avoiding any further penalties that missed payments may incur.
Further, if you’re looking to reshape your spending habits, getting out of credit card debt with a HELOC may offer a clean slate, so long as you commit to diligent repayment.
So, is a HELOC a good idea? After considering the pros, cons, and the best times to use a HELOC to pay off your credit card debt, you may decide it’s not right for you. Fortunately, a home equity line of credit isn’t the only way to pay off your credit card debt.
Sometimes, the most strategic approach to paying off high-interest credit card debt may mean using another credit card—specifically a credit card with a balance transfer offer. As the name would suggest, balance transfers allow you to transfer your balance from one card to another, often for a nominal fee but at zero interest for a limited time.
This approach would allow you to pay down your debt without fighting against the current interest, putting a significant dent in your balance or even eliminating it altogether.
A debt management plan (DMP) can also help you consolidate your debt—typically for a cost. Here’s how it works. When you enlist the help of a debt management company, they do the legwork of negotiating with creditors to consolidate and reduce your debt. Then, it becomes your responsibility to diligently follow this program while making monthly maintenance fees.
With a debt management plan, you can get the structure you need to reshape your spending habits while also gradually reducing your balance.
If you want debt relief without a loan, without interest, and on your own schedule, Truehold’s sell and stay transaction can be your ticket out of high-interest credit card debt.
Unlike a HELOC, a sell and stay isn’t a loan. Rather, it’s a two-part transaction to unlock your home equity and repay your debts. With Truehold’s sell and stay transaction, you sell your home and receive your hard-earned equity. You can then continue living in the home as a renter, free from the responsibilities of homeownership while you map out your next move.* A new home, retirement, or paying off debts—how you enjoy your equity is up to you.
To learn more about a sell and stay transaction, connect with one of our representatives today.
Disclaimer*: After the home sale, you must comply with the terms of your lease to continue living in the home. This includes making timely payments on your rent for your minimum lease term (which ranges from 6 – 24 months).
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