Should I use a HELOC to pay off credit card debt?

You have a lot of credit card debt, and you’d love to pay it off all at once. A home equity line of credit (HELOC) could be the answer. 

It’s basically borrowing money from a new source to settle the sums you owe the old source — exchanging one debt for another. But this new debt can be easier to deal with.

Not that it doesn’t carry its own concerns. Here’s what you need to know about using a HELOC for paying off your credit cards: the pros and the cons.

How to use a HELOC to pay off credit cards

The strategy is simple: You apply for a HELOC — a line of credit based on your home equity, the percentage of your home you own outright (not mortgaged). Once the credit line is established, you draw against it, and use these funds to pay off your credit card balances.

You’ll have to repay the money you borrowed from your HELOC, of course, but you’ll generally have a long period in which to make the payments: a decade or two. And your HELOC will likely have a much lower interest rate than your credit cards or a personal loan.

Benefits of using a HELOC to eliminate credit card debt

There are several benefits to using a home equity line of credit to pay off credit cards. Nearly one-third (30 percent) of homeowners cite debt consolidation as a good reason to tap their home equity, according to Bankrate’s Home Equity Insights Survey. It was the second most popular rationale, in fact.

You get rid of all your debt at once

Instead of paying off credit card debt bit by bit (with either the snowball method or the avalanche method, for example), a HELOC lets you eliminate it immediately or within a few months. If you are currently feeling overwhelmed by the outstanding balances, using a HELOC can provide significant mental relief.

Your interest rate will likely be lower

The average credit card interest rate is more than 20 percent. In contrast, the average HELOC interest rate is hovering just above 8 percent as of mid-June 2025. Keep in mind that these are variable interest rates, which means they can go up or down depending on the prime rate. Even if your HELOC interest rate rises, though, it’s still likely to be much lower than your credit card’s APR (which will also fluctuate with the prime rate, remember).

Your financial profile will improve

By paying off those high-interest balances, you’ll have a lot more discretionary income, of course. Your FICO credit score should also increase with the absence of debt on your record. Because a HELOC is secured by your home, its balance doesn’t count in computing your credit utilization ratio, one of the factors determining your score. (The HELOC itself will appear on your credit report, though.)

Why shouldn’t you pay off credit cards with a HELOC?

Using a HELOC to consolidate debt isn’t without its risks.

You might lose your home

HELOC debt is secured debt, which means that if you don’t pay it off in full, the lender has the right to claim whatever you put down as collateral. With a HELOC, that’s your home. When you take out a HELOC, you run the risk of foreclosure if you miss payments or can’t pay back the principal within the designated time period. Credit card debt, by contrast, is unsecured — meaning, the card issuer can make scary noises, but can’t seize anything of yours in payment.)

You might end up in even more debt

Nobody pays off their credit cards with the intention of immediately digging a new debt hole. But if you don’t practice healthy financial habits, you could find yourself right back where you started, sooner rather than later.

If you use a HELOC to pay off your credit cards and then start building up unpaid balances again, you’ll have both the credit card debt and the HELOC debt to pay back. Plus, during the HELOC’s draw period, you might be tempted to use any leftover credit, accruing even more debt.  It can be easy to lose track of how much you’re spending, too.

You might experience sticker shock

Many HELOCs allow you to repay just interest during their draw periods. If you surrender to that temptation, your monthly payments will abruptly zoom when you enter the repayment period, because they’ll now include both principal and interest. And if interest rates have risen as well, you might find your monthly obligation double or triple its previous amount — which can be a big blow to the budget if you didn’t prepare for the increase.

Is a HELOC or a HELoan better for paying off debt?

Both HELOCs and home equity loans (HELoans) can be effective ways to pay off debt. In the case of credit card debt, though, the HELoan may have a slight edge.

Presumably, you know (or can calculate) the exact outstanding amount on your cards. And presumably, you’d want to clear it as soon as possible because those high APRs multiply balances at a rapid clip. This situation is well-suited for a home equity loan, which disburses a single lump sum that gets repaid in fixed-rate monthly installments. In contrast, with their fluctuating interest rates and long draw periods, HELOCs work well when you’re not sure of the exact sum you’ll need, or for expenses that get incurred over a long period (like college tuition or a contractor’s bill on a long-term construction project).

Home equity loans’ interest rates are comparable to HELOCs.  (As of this writing, they are averaging 8.45 percent.) Of course, you are locked into paying that rate for the loan’s lifetime.

HELOCS vs. home equity loans: which to use when

While you can use either in most situations, HELOCs are more advantageous for some expenses, while home equity loans work better for others.

What are alternatives to HELOCs to pay off credit cards?

HELOCs aren’t the only debt-settling tool in town. Most of these alternatives mean you won’t have to put your home up as collateral, but they do have drawbacks.

• Debt consolidation loan: Roll all your credit bills together and pay them with a single debt consolidation loan, one with a lower interest rate. A reputable debt counseling service can help you do this, in addition to providing guidance on how to manage your finances and pay off your balances over time. This move can have negative consequences for your credit score, though.
• Personal loan: Unsecured personal loans can be easier and quicker to obtain than home equity products. On the downside, their interest rates are higher, even if you have a strong credit score (720 or above). Also, their terms are usually shorter.
• Balance transfer credit card: Moving outstanding debt from one credit card to a new one can help you take advantage of low promotional interest rates: You might even find a card with a 0 percent APR. Just make sure you’ll be able to pay off the balance before that introductory rate period expires, usually within a year or two.
• Cash-out refinance: With a cash-out refinance, you’re tapping your home equity, swapping out your old mortgage for a new, larger one and taking the difference in cash. Cash-out refis carry lower interest rates than HELOCs – but there’s also the hassle of having to apply and go through underwriting all over again, plus paying closing costs.

How to decide if a HELOC to pay off credit debt is right for you

While a HELOC can be a smart way to tackle credit card debt, it’s not the best move for everyone.

Using a HELOC to settle credit card balances can make good fiscal sense if you own a substantial stake in your home outright — giving you a lot of money to borrow — and the interest rates on your outstanding card debt are in the high double digits.

That said, this strategy comes with its risks, including the risk of losing your home. Also, bear in mind that HELOCs can be tough to get: They demand at least a “very good” credit score — which, if you’ve got a mountain of debt, you may not have.

If you’ve got a good amount of home equity to tap, and can score a low interest rate, it could be the best choice. But be sure to compare the APRs and understand the repayment terms and fees. You don’t want to get blindsided — not when it’s your home on the line.

FAQ

• Can I use a HELOC for other expenses besides credit card debt?

  Yes, lenders typically don’t have any restrictions on what you can use HELOCs for. Homeowners use HELOCs for a variety of expenses, including home renovations, education expenses and to start or grow a business.

• Do I have to pay off my credit card debt all at once with a HELOC?

  No, you don’t have to pay off of your credit card debt all at once with a HELOC. It’s a revolving line of credit: You can choose how much of it to use and when and to use it (in line with any rules the lender has about withdrawals, of course). But the sooner you settle those high-APR credit card balances, with their ever-multiplying amounts, the better.

• How can I avoid the temptation to re-borrow after using a HELOC to pay credit cards?

  Treat your HELOC like a loan rather than a line of credit and set up a structured plan to pay it back, even before the repayment period begins. Reduce your reliance on credit by creating a realistic budget. Limit yourself to using just one or two credit cards (to better keep track of your spending) and shifting to using cash or debit cards for everyday expenses.