You have a lot of credit card debt and you want to pay it all back at once. Home Equity Credits (HELOC) could be the answer.
Basically, it’s about borrowing money from the new source and resolving the amount owed to the old source. However, this new debt can be easier to deal with.
That doesn’t mean that it doesn’t bring about any concerns in its own right. Here’s what you need to know about using HELOC to pay off your credit card:
How to use HELOC to repay your credit card
The strategy is simple. Apply for HELOC. This is a credit line based on home equity, a percentage of your home you own (not mortgaged). Once a credit line is established, you will object to it and use these funds to repay your credit card balance.
Of course, you will need to pay back the money you borrowed from Heloc, but there is usually a long period of time to make the payment. HELOCs may also have much lower interest rates than credit cards or personal loans.
Benefits of using HELOC to eliminate credit card debt
There are several benefits to using a home equity credit line to pay off your credit card. Nearly a third (30%) of homeowners say they cite debt consolidation as their base, according to Bankrate’s Home Equity Insights Survey. In fact, it was the second most popular basis.
you I’ll remove it All debts at once
Instead of paying off your credit card debt just a little (for example, the Snowball method or the Avalanche method), using HELOC can be eliminated immediately or within a few months. If you are currently feeling overwhelmed by a good balance, using HELOC provides significant mental relief.
Your interest rate will probably be lower
The average credit card interest rate is over 20%. In contrast, the average HELOC rate was slightly above 8% as of mid-June 2025. These mean that they will rise or fall depending on interest rates. However, even if HELOC rates rise, they may be much lower than credit card APR (even prime rates fluctuate, remember).
Your financial profile will improve
Of course, there is more discretionary income by paying back these high profit balances. Your FICO credit score should also increase if your records are not liable for debt. HELOC is secured by your home, so that balance is not counted when calculating your credit usage. It is one of the factors that determine your score. (However, HELOC itself will appear on your credit report.)
Why don’t you have to pay back your credit card with HELOC?
Using HELOC to consolidate debts is not without risk.
You may lose your home
Heloc obligations are secured obligations. This means that the lender has the right to claim anything you place as collateral. In Helock, it’s your home. If you retrieve a HELOC, you risk for foreclosure if you miss payments or fail to repay the principal within the specified period. In contrast, credit card debt is unsecured. This means that card issuers can make horrible noises, but they can’t grab yours with payment. )
You could end up in more debt
No one will reward their credit cards with the intention of digging a new debt hole soon. However, if you don’t practice healthy financial habits, you can quickly return from where you started earlier than later.
If you use HELOC to repay your credit card and then start building your unpaid balance, both Credit card debt and HELOC debt to be repaid. Additionally, you may want to use the remaining credits during the HELOC draw period. It’s easy to track how much you spend.
There may be a sticker shock
With many HELOCs, you can only repay interest during the draw period. If you surrender to that temptation, your monthly payments suddenly zoom as you enter the repayment period. and interest. You may also find previous amounts where your monthly obligations are double or triple, if interest rates also rise. This could be a major blow to your budget if you don’t prepare for an increase.
Is Herock or Heroan better to pay off his debt?
Both HELOC and Home Equity Loans are effective ways to pay off your debt. However, in the case of credit card debt, Helone may have a slight edge.
Perhaps you know (or can calculate) the exact amount of outstanding payments on your card. And you’ll probably want to clear it as soon as possible, as these high APRs balance with quick clips. This situation is good for home equity loans that pay a single lump sum payment, which is repaid in a fixed monthly installment. In contrast, HELOC works well if you don’t know what amount you need due to fluctuations in interest rates and long draw periods, or if you have long-term costs (such as a contractor’s invoice for a long-term construction project).
Home equity loan interest rates are comparable to HELOC. (At this time of writing, they average 8.45%.) Of course you are trapped in paying that rate for your lifetime of your loan.
HELOCS vs Home Equity Loan: When to Use
In most situations you can use either, but HELOC is more advantageous at some costs, while home equity loans are more suitable for other costs.
| cost | Preferred tools | Why does that make sense? |
|---|---|---|
| emergency | Herone | This is probably a fixed amount that is better to pay back as quickly as possible. |
| Business Startup | helic | The cost is indefinite and runs for a long period of time |
| Credit card balance | Herone | How much more you can add to pay back all the plastic. |
| University tuition fees | helic | You can withdraw funds as needed just for semester, quarter, and six months payments |
| A multi-monthly home renovation project | helic | Regular draws are ideal for paying contractors in installments. If your project has a cost overrun, there are spares |
| Medical expenses | Herone | It’s better to pay this invoice in total |
What is the Helocs alternative to paying off your credit card?
Helocs is not the only debt-collecting tool in town. Most of these alternatives mean that you don’t need to raise your home as collateral, but they have their drawbacks.
- Debt settlement loan: Roll all your credit invoices together and pay with a single debt consolidation loan. Reputable debt counseling services can help you do this, in addition to providing guidance on how to manage your finances and pay off your balance over time. However, this move can have negative consequences for your credit score.
- Personal loan: Unprotected personal loans may be easier and faster to get than home equity products. On the downside, even if you have a strong credit score (720 or higher), interest rates will still be high. Also, their terms are shorter than usual.
- Balance Transfer Credit Card: Moving a new debt from one credit card to a new debt will help you take advantage of the lower interest rates on the promotion. You can also find 0% APR cards. Usually within one to two years, you should be able to repay your balance before the introductory rate period expires.
- Refinance cash out: With cash-out refinance, you can tap on your home equity and exchange your old mortgage for a new, bigger one, and get a cash difference. Cash-Out Refis has a lower interest rate than HELOC, but it also requires the hassle of having to apply again and underwrite, and you will also have to pay for the closure fee.
How to determine whether HELOC is right for you to pay off your credit debt
HELOC is a wise way to tackle credit card debt, but it’s not the best move for everyone.
Resolving your credit card balance using HELOC gives you more money to borrow if you own a fair amount of interest in your home – and if the interest rate on your outstanding card liability is at a high double digit, it makes good financial sense.
That said, this strategy carries risks, including the risk of losing a home. Also, keep in mind that Helocs can be difficult to obtain. They ask for at least a “very good” credit score. This may not be the case if you have a mountain of debt.
If you have a substantial amount of home equity to tap and you can win low interest rates, that might be the best option. However, compare APRs and understand the repayment terms and fees. You don’t want to be blind – not when it’s your home.
