Home equity loans and home equity lines of credit (HELOCs) have lower interest rates than credit cards. That can lead some homeowners to use them to pay down large credit card bills.
But this method isn’t foolproof: Most notably, you’re trading an unsecured debt for a secured one that uses your home as collateral. If you fail to make on-time payments, your lender could force you into foreclosure.
In addition, most home equity products have minimum draws that can be as high as $35,000, so if your credit card bills are significantly lower than that, it might not be the right move.
We look at the benefits and pitfalls of using your home to pay off high-interest debt.
How to pay off high-interest debt with home equity
If you own your home, you can take out a home equity loan or a HELOC and use the funds to pay off high-interest debt, like credit card bills or private student loans.
A home equity loan gives you a lump sum payment with a set period to repay it, usually between 10 and 30 years. Borrowers typically need at least 15% to 20% equity to qualify, a credit score of 680 and a debt-to-income ratio of 43% or less.
Rocket Mortgage lends homeowners up to 90% of their house’s value, higher than most of the competition, while Third Federal has some of the lowest rates in the industry.
Rocket Mortgage Home Equity Loan
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Annual Percentage Rate (APR)
Apply online for personalized rates
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Loan minimum and maximum
Minimum: $45,000; Maximum: $500,000
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Terms available
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Credit needed
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Minimum equity required
Third Federal Savings & Loan
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Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
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Types of loans
Conventional loan, jumbo loan, refinancing, HELOC
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Terms
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Credit needed
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Minimum down payment
A HELOC is more like a credit card in that it’s a revolving line of credit — but one that uses your house as collateral. Your lender sets the maximum initial withdrawal amount, as well as the terms of the draw period (usually 10 years), during which you only have to make payments on the interest.
After that, you can’t take out any more money and you’ll have to start repaying both the principal and interest.
The requirements for a HELOC are similar to a home equity loan, though you can get approved with a credit score as low as 620.
Figure offers HELOCs with an entirely online approval process, from application to closing. If you prefer an in-person experience, Bank of America has nearly 6,000 branches nationwide.
Bank of America Home Mortgage Loans
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Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
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Types of loans
Conventional loans, FHA loans, VA loans, Affordable Loan Solution® mortgage, Doctor loans
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Terms
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Credit needed
Conventional loans typically require a 620 credit score
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Minimum down payment
3% with Bank of America’s Affordable Loan Solution® mortgage loan
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Offers first-time homebuyer assistance?
Figure
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Annual Percentage Rate (APR)
Apply online for personalized rates
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Types of loans
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Terms
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Credit needed
Is a home equity loan or HELOC better for credit card debt?
Both home equity loans and HELOCs are useful financial tools, but they work best in different situations.
If you’re dealing with ongoing payments, say for a home renovation or college tuition, a HELOC is the right call.
But a home equity loan makes more sense if you need a one-time cash infusion to tackle credit card bills. You get all the money at once and the rates are significantly lower: The median average credit card interest rate in March 2025 was 24.20%, according to Lending Tree, compared to just 7.65% for home equity loans.
You may also soon be able to deduct the interest: Right now, homeowners can only write it off if the loan was used for home improvements. But when the 2017 Tax Cuts and Jobs Act sunsets at the end of 2025, those restrictions will be lifted. Without further action by Congress, homeowners could write off home equity loan interest regardless of what the money was spent on.
Should you use a home equity loan to pay off your credit cards?
Leveraging your home to pay astronomical credit card bills might seem like a no-brainer. But card debt is unsecured: Creditors can tack on fees and higher interest rates, send your account to collections, tank your credit score and even seek legal action. But they can’t repossess the vacations, dinners and groceries you charged on your card.
A home equity loan, though, is a secured debt that uses your property as collateral. If you fall behind on payments, your lender can take possession of your house. So, only use it to pay off credit cards if you are confident you can make payments in full for the life of the loan.
In addition, home equity products typically have a minimum loan amount, which can be anywhere from $10,000 to $35,000, plus lender fees and closing costs, which can range from 2% to 5% of the loan amount.
So, using home equity makes more sense if you owe at least $25,000 in credit card debt.
There are other ways to chip away at high-interest debt, too. For example: a cash-out mortgage refinance enables you to take out a home loan that’s larger than your current one and use the difference to pay off your bills. You’re still using your home as collateral, but interest rates are generally lower.
You can also take out a debt consolidation loan: The interest rate is higher than a home equity loan but lower than a credit card — and you don’t have to put your home at risk.
Pros and cons of using a home equity loan to pay off debt
Pros
- You’ll receive a lower interest rate that’s fixed.
- Monthly payments are usually smaller
- You may soon be able to deduct the interest from your taxes
Cons
- Your lender can foreclose if you fail to make payment
- The loan repayment period may be longer
- There is a greater risk of owing more on the home than it’s worth
- You’ll lose equity in your house
Home equity FAQs
Is it better to use a home equity loan or a HELOC to pay off credit card debt?
Usually, it’s better to pay off credit card debt with a home equity loan because it is issued in one lump sum and the rate tends to be lower than a HELOC. You’re still swapping an unsecured debt for one that uses your house as collateral, however, so think seriously about your ability to keep up payments.
Is a home equity loan tax deductible?
Right now, the interest on a home equity loan is only tax deductible If you use the funds for home improvements. But when the 2017 Tax Cuts and Jobs Act expires at the end of 2025, homeowners can write off the interest regardless of what the money was spent on.
How long does it take to get approved for a home equity loan?
Home equity loans are usually funded within two to six weeks, from submitting your application to closing on the loan. The specific timeline can vary, however, based on the lender, your financial situation, and how quickly you can get an appraisal scheduledÂ
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