5 perks of using a HELOC to consolidate debt

Homeownership comes with certain benefits. You can decorate your living room with hubcaps and velvet posters. You can be a pet parent to your heart’s content. If you have built enough equity, you could borrow against it as part of your plan to improve your finances. (Equity is the difference between what you owe on the home and what it's worth.)

Using a HELOC to consolidate debt has some clear benefits over other forms of debt consolidation. The HELOC might help you pay off debt faster, save money on interest, and manage your finances more easily with fewer debt payments to make each month. 

Some not-so-obvious perks make a HELOC for debt consolidation even more attractive. 

Hidden (and not so hidden) perks when you consolidate debt with a HELOC 

A home equity line of credit (HELOC) offers flexibility since you can use the money for virtually anything, which includes debt consolidation.  

1. You decide how long to pay

If you don't know how a home equity line of credit works, here's a quick rundown. HELOCs have an initial draw period in which you can borrow, repay, and borrow more, up to your limit, as often as you like. Once that ends, you enter the repayment period. 

A typical HELOC draw period is five years, and repayment can last anywhere from five to 30 years. You can choose a repayment term that's most likely to fit your budget now and in the future. 

A shorter term pays your HELOC off faster, while a longer term lowers your monthly payment. 

2. Your credit score could improve

HELOC payments are reported to the credit bureaus. That means they show up on your credit reports and can affect your credit scores.

Credit scores tend to go up when you pay your bills on time. If you make your HELOC payments on time, you could see a positive impact on your credit (especially if you’ve struggled with late payments in the past). Payment history affects your scores more than any other factor. 

Credit scores also tend to like it when you keep your credit card debt low or very low. Your credit utilization is how much you owe on your credit cards in relation to your credit limits. If your credit card balances are zeroed out because you've paid them off with a HELOC, that could give your credit standing a boost.  

This only works if you avoid racking up new balances after you pay off your cards with the loan. Stash your cards away somewhere secure. Remove the card numbers from your favorite online store websites. 

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

3. You're not limited to debt consolidation

You can use a HELOC to consolidate debt, but that's not all you can do with it. You could also put some of your HELOC funds toward home improvements or repairs. 

For example, you might use part of your HELOC to replace your roof, upgrade your HVAC system, or remodel that 70s style kitchen you've never grown to love. That's the great thing about HELOCs—you get to decide how the money is spent. 

If the improvements you make increase your home's value, that's yet another perk. Should you decide to sell, you could land a bigger sale price, thanks to your HELOC. 

4. You don't have to drain your cash

If you have some cash tucked away, you might wonder if it makes sense to use it to pay off debt. One factor to consider is where you'd be if a financial emergency came along.

Without a rainy day fund, you might have to use loans or credit cards to cover an emergency. That could get expensive if you're stuck with a higher interest rate. 

When you consolidate debt with a HELOC, you can leave your emergency fund alone until you truly need it. You also don't have to worry about crazy-high credit card interest costs if you get a HELOC with a low rate. 

5. Your cat will like you better

Okay, so maybe your cat won't care one way or the other whether you get a HELOC to consolidate debt. Heck, you might not even have a cat. But you will feel better about yourself when you know you're making progress toward your financial goals.  

A HELOC lets you do that with less financial stress. It's easier to put your focus on other money goals when you don't have a pile of bills to worry about each month. Whether those goals are big or small, a HELOC could help you reach them. 

Ready to learn what you could do with a HELOC? See if you qualify for a HELOC from Achieve and borrow up to $300,000.