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Home Equity Loans

5 key benefits of using a HELOC for debt consolidation

Jun 27, 2025

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Written by

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Reviewed by

Key takeaways:

  • A HELOC offers flexible access to money for debt consolidation or other expenses. 

  • Debt consolidation with a HELOC could simplify your finances and potentially help you save money on interest.

  • It could make sense to consolidate debt with a HELOC if you're ready for less debt stress. 

Your home is more than the place where you live. It’s a financial tool that’s been quietly working in your favor. Every mortgage payment you’ve made, every uptick in the value of your home has been building financial power that you can flex now as part of your bigger plan.

Here's why a HELOC could make sense for debt consolidation. 

1. Simplify payments

A home equity line of credit (HELOC) allows you to combine multiple debts into one so you have fewer payments to make each month. 

For example, let's say your debt breakdown looks like this:

  • Credit Card A: $5,000

  • Credit Card B: $7,000

  • Credit Card C: $4,000

  • Credit Card D: $8,000

  • Medical debt: $6,000 

That's $30,000 in debt spread across five monthly payments. 

You could get a $30,000 HELOC to pay off all the debts. That would leave you with just one payment to budget for and make each month on your home equity loan.

Pro tip: Schedule automatic payments from your bank account. It's a simple way to manage your HELOC and ensure you don't miss a due date. 

2. Lower rates

“I love debt,” said nobody. But steep interest rates slow your debt payoff progress, and credit cards are notoriously expensive. Dragging around high-interest debt could keep you in debt longer.

The average credit card APR was 22.76% as of May 2024, according to the Federal Reserve. Your APR or annual percentage rate is your yearly cost to borrow money based on your interest rate and any fees your lender charges. 

Debt consolidation with a HELOC could help you lower the interest rate on your debt. On average, HELOCs come at much lower interest rates than credit cards. Instead of paying 18-28% or more, you might pay 9-13% instead. 

Even a difference of just one or two percentage points could make your debt easier to repay. That lower rate could save you more money on interest in the long run. 

3. Flexibility

A HELOC is a flexible way to borrow money. When you get a HELOC, you can borrow repeatedly during the first few years. This is called the draw period, and it’s when your HELOC works like a credit card. You can borrow, repay, and borrow more as often as you like (up to your credit limit). Your draw period could be five to ten years.

Once the draw period ends, you can’t borrow more. That’s when you enter the repayment period. You may have five to 30 years to pay off the balance.  

HELOCs aren't just for debt consolidation, either. You could also use your home equity to pay for:

  • Home improvements or repairs

  • Elective medical care

  • Dental work

  • Large purchases

  • College expenses

  • Emergencies

The best part is that you only pay interest on the part of your credit line that you use. So if you're approved for a $50,000 HELOC but only owe $25,000, that's all you'd owe interest on. 

4. Credit score impact

Did you know that debt consolidation with a HELOC could give your credit score a boost?

One of the factors that affects your score is your credit utilization ratio. In simple terms, that means the size of your credit card balances compared to your credit limits.  

When you use a HELOC to pay off credit card debt your credit utilization ratio goes down (at least initially), since you’ve moved your balances from credit cards to an installment loan. As long as you avoid new credit card debt—and make your HELOC payments on time—your scores could go up. 

Achieve isn't a Credit Repair Organization and doesn't provide or offer services or advice to repair, modify, or improve your credit.

5. Less stress

Financial stress is hard on your mental and physical health. A HELOC may help alleviate some of the stress debt might cause. Here's how. 

  • You don't have to worry about where multiple debt payments will fit into your budget. 

  • It's easier to stay on top of debt payment due dates when you have fewer to manage. 

  • You might be able to pay your debt off faster if you have a lower interest rate.

  • Debt shame evaporates because you've taken control of the situation. 

  • Your mental and physical health may improve if debt is less of a stressor.  

Those are all good reasons to consider a HELOC for debt consolidation. And there's one more benefit as well. Once you have a handle on debt, you can start to think about the other financial goals you want to reach. 

Debt consolidation could help you get ahead

If you own a home and you have some equity built up, it may be worth it to get a rate quote for a HELOC. You can find out what rate and repayment terms you might qualify for. That could help you decide if it's the best way to consolidate debt. Even if you don't go the HELOC route and use a different method, like a personal loan, debt consolidation has some undeniable benefits. 

Read more: 5 must-know facts about debt consolidation

Author Information

Rebecca-Lake.jpg

Written by

Rebecca is a senior contributing writer and debt expert. She's a Certified Educator in Personal Finance and a banking expert for Forbes Advisor. In addition to writing for online publications, Rebecca owns a personal finance website dedicated to teaching women how to take control of their money.

Jill-Cornfield.jpg

Reviewed by

Jill is a personal finance editor at Achieve. For more than 10 years, she has been writing and editing helpful content on everything that touches a person’s finances, from Medicare to retirement plan rollovers to creating a spending budget.

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Home Equity loans are available through our affiliate Achieve Loans (NMLS ID #1810501). Equal Housing Opportunity. Offers may vary and all loan requests are subject to eligibility requirements, application review, loan amount, loan term, income verification, and lender approval. Product terms are subject to change at any time. Offers are a line of credit. Loans are not available to residents of all states and available loan terms/fees may vary by state where offered. Line amounts are between $15,000 and $300,000 and are assigned based on product type, debt-to-income ratio and combined loan-to-value ratio. 10, 15, 20, and 30-year terms available. Minimum 600 credit score applies for debt consolidation requests (20 and 30 year terms require a minimum credit score of 640), minimum 700 applies for cash out requests. Other terms, conditions and restrictions apply. Fixed rate APRs range from 6.74% - 14.75% and are assigned based on underwriting requirements and offer APRs assume automatic payment enrollment which may provide a discount (autopay enrollment is not a condition of loan approval). All terms have a 5-year draw period with the remaining term being a no draw period. Payments are fully amortized during each period and determined on the outstanding principal balance each month. Closing fees range from $750 to $6,685, depending on line amount and state law requirements and typically include origination (3.5% of line amount) and underwriting ($725) fees if allowed by law. Property must be owner-occupied. Combined loan-to-value ratio may not exceed 80% (20 and 30 year debt consolidation requests may not exceed 75%), including the new loan request. Property insurance is required and flood insurance may be required if the subject property is located in a flood zone. You must pledge your home as collateral. Loan funding time is dependent on full application and documentation submission, average funding time is 11 business days for 2025, including rescission. Monthly/yearly savings claim is based on average monthly debt savings from originated loans for Q4 2024. Monthly/yearly savings varies based on each loan situation and can be more or less than $800/$10,000. Requirements to obtain 6.74% APR include: debt to income ratio <=15%; cumulative loan to value <= 50%, including new request; loan amount between $15,000 and $150,000; term of 10 years; FICO of 800+; and automatic payment enrollment. Contact Achieve Loans for further details

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