Should you use a HELOC to pay off debt?

A HELOC is a line of credit secured by your home. If you pay off debt using a home equity line of credit (HELOC) and can reduce your rate, you might be able to make debt payoff cheaper and easier. This strategy could lower your interest rate and simplify payments.

Why some homeowners use a HELOC to pay off debt

Many people use a HELOC to pay off debt because of the advantages of home equity debt consolidation:

• Reduce monthly payments

• Simplify debt payoff

• Stretch out your repayment timeline

Here’s a closer look at why it might make sense to use your home equity to pay off debt:

• Lower interest rates on home equity loans and HELOCs. You’ll generally pay lower rates than you would on credit cards or other borrowing options. As of early 2026, average interest rates on cards were 21%. HELOC rates are often less than half that amount. 

• Borrow enough to consolidate all your debt. HELOCs could work well for debt consolidation because you may be able to borrow a large amount (depending on how much home equity you have). If you can borrow enough to pay off all your other creditors, that could make it easier to deal with your debt. You could reduce multiple monthly payments down to one. 

• Repay your debt over a longer time. You may be able to get a HELOC with a longer repayment term than other alternatives. For example, whereas personal loans tend to have five, seven, or 10 year terms, repayment terms for a HELOC may be as long as 20 or 30 years.

• Potentially improve cash flow. Your spending options are limited if you pay large bills to creditors each month. Consolidating with a HELOC could free up some room in your budget if you’re able to get a lower total monthly payment.   

Plenty of real-world examples illustrate why it could be smart to use home equity to pay off credit cards or other high-interest loans. 

If you’re a homeowner with $25,000 in credit card debt at 21% to 23% APR, a HELOC could potentially cut that rate in half. More of each payment will go to paying down the principal.

Likewise, if you have strong equity but limited savings, using a HELOC to repay debt may improve your cash flow to the point where you'll be able to save more. 

Read more: Benefits of using a HELOC for debt consolidation

The risks of using a HELOC to consolidate debt

You've looked at the pros. Now, let's look at the cons. Here are some of the biggest downsides:

• You risk foreclosure. If you don't pay, you could default, and the bank could foreclose. That means losing your house. You usually don't have to worry about creditors taking your house if you default on unsecured debt such as credit cards. 

• You could pay more interest over time. A HELOC may have a longer repayment time than your current debt. Even at a lower rate, owing money for longer could mean paying more interest over time. 

• Closing costs. Closing costs on a HELOC could include lender fees, appraisal fees, and other administrative fees.  

Read more: Should you use a HELOC or home equity loan to consolidate debt?

• Your rate may be variable. HELOCs often have variable rates that can change over time. This introduces uncertainty. It also means your costs could go up. 

• You’ll have less equity. Using a HELOC to pay off debt reduces how much of your home you truly own, because you’re borrowing against it. 

When using a HELOC for debt might make sense

Using a HELOC for debt could actually make sense in situations like the following:

• Your income is stable. You’re sure you can pay the debt and protect your home. 

• You have a clear repayment plan. You know you can afford the monthly payments for the loan term. 

• You'll have the debt paid off earlier than under your current plan. If you can pay off your debt faster, you’ll likely pay less interest. You'll also get more financial flexibility sooner. 

• You can reduce your rate significantly. The lower your rate, the bigger your potential savings.

• You'll make your debt easier to pay. If you're struggling under your current payment plans, paying off creditors using a HELOC may give you more breathing room. 

When using a HELOC for debt may not be the right move

On the flip side, sometimes using a HELOC may not be the ideal choice. Here's when you may want to consider other alternatives:

• You can’t qualify for an interest rate lower than you currently pay. It usually doesn't make sense to refinance to loans with a higher rate.

• Your income is unstable or you’re experiencing financial hardship. You don't want to risk your house if you're already struggling. 

• You have a small debt balance. It doesn't make sense to pay closing costs and go through the trouble of getting a HELOC if you'll be able to pay back what you owe very soon.

• You're considering bankruptcy. Unsecured debts like credit cards and medical bills can usually be discharged (forgiven) in bankruptcy. Secured debts can't. You're better off keeping your debt unsecured if bankruptcy is on the table.

• You don't have a plan to avoid future debt. You don't want to end up consolidating debt and then getting deeper into debt. Be sure you can live on a budget and avoid borrowing.

Alternatives to using a HELOC for debt

If a HELOC isn't right for you, you have plenty of other options, such as:

• Personal loan. You could use a personal loan to consolidate debt. Personal loans usually have a lower interest rate than credit cards and they're unsecured debt, so your home isn't at risk. 

• Debt settlement. Debt settlement is a powerful form of debt relief for someone with financial hardship who genuinely can’t afford full repayment. When you settle debt, you negotiate with your creditors to pay less than the full balance. 

• Balance transfer card. A balance transfer credit card gives you a temporary 0% rate on transferred balances. You’ll pay an upfront fee to transfer a balance, usually 3% to 5% of the amount transferred. If you don't pay off the balance while the 0% rate is in effect, the rest of your balance will be subject to a more typical high credit card rate.

• Budget restructuring. This is a fancy way of saying you could adjust your budget so you can repay debt. You could either increase income or cut spending, or both.

Explore our step-by-step guide to using a HELOC to manage debt.