Using Home Equity to Tackle Debt and Escape High-Interest Credit Cards

Greg Hanlon
Mar 5
2 min read

If you're struggling with high-interest credit card debt, you’re not alone. With interest rates soaring and minimum payments barely making a dent, many homeowners are looking for smarter ways to manage their debt. One of the most effective strategies? Using home equity to consolidate and pay off high-interest debt.

What Is Home Equity?

Home equity is the difference between your home’s market value and the amount you owe on your mortgage. As you make mortgage payments and as your home appreciates in value, your equity grows. This equity can be accessed through financial tools such as a Home Equity Line of Credit (HELOC) or a cash-out refinance.

How Can Home Equity Help You Get Out of Debt?

By tapping into your home equity, you can replace high-interest debt with a lower-interest loan, making it easier to pay off what you owe. Here’s how it works:

Lower Interest Rates – Credit cards often come with interest rates of 20% or more. In contrast, home equity loans and HELOCs typically have much lower interest rates, saving you thousands over time.
Simplified Payments – Instead of juggling multiple credit cards, you can consolidate all your debts into a single loan with one manageable monthly payment.
Faster Debt Payoff – With a lower interest rate, more of your payment goes toward the principal balance, helping you pay off debt faster.
Tax Benefits – In some cases, the interest on a home equity loan or HELOC may be tax-deductible if used for home improvements. Always check with a tax professional for specifics.

Home Equity Loan vs. HELOC: Which Is Right for You?

Home Equity Loan: A lump sum loan with a fixed interest rate and fixed payments over a set term. Ideal if you need a one-time payment to clear your debts.
HELOC (Home Equity Line of Credit): A revolving credit line that allows you to borrow as needed. HELOCs typically have variable interest rates and are great for ongoing expenses.

Things to Consider Before Using Home Equity for Debt Relief

While using home equity to consolidate debt has its benefits, there are risks to keep in mind:

Your Home Is Collateral – Since home equity loans and HELOCs are secured by your home, failure to repay could result in foreclosure.
Fees and Closing Costs – Some loans come with fees, so make sure to factor in all costs when considering your options.
Changing Spending Habits – If credit card debt was caused by overspending, it’s essential to adjust financial habits to avoid falling back into debt.

Is Using Home Equity the Right Move for You?

If you have significant home equity, stable income, and a plan to stay financially disciplined, using home equity can be a powerful tool for eliminating high-interest debt. However, it’s crucial to work with a mortgage professional who can guide you through the process and help you secure the best terms for your situation.

Ready to explore your options? Contact us today to discuss how you can leverage your home equity to take control of your finances and eliminate high-interest debt for good.