Use Home Equity to Escape High-Interest Credit Card Debt
Quick Answer
If you own a home with equity, you may be able to pay off high-interest credit card debt using a cash-out refinance or a HELOC. With some card rates as high as 29.9%, tapping equity can lower what you pay in interest, but your home secures the loan, so talk it through with a licensed lender first.
Credit card debt is like the guest who won't take the hint that it's time to leave. I've seen card interest rates as high as 29.9% lately, which is a heavy weight to carry. If you own a home and you've built up equity, you have options to get out from under it. Two of the most common are a cash-out refinance and a HELOC.
How does home equity help with credit card debt?
Your equity is the share of your home's value that you actually own. When your card is charging a rate as high as 29.9%, moving that balance to financing secured by your home can lower the interest you pay, because home-based borrowing typically carries a lower rate than unsecured credit cards. The trade-off is important: your home is the collateral. That's exactly why it's worth understanding the two main tools before you decide.
Cash-out refinance vs. HELOC: what's the difference?
- Cash-out refinance — you replace your current mortgage with a new, larger one and take the difference in cash to pay off the cards. You end up with a single mortgage payment.
- HELOC (home equity line of credit) — you keep your existing mortgage and open a separate line of credit against your equity, drawing what you need to clear the balances.
Which one fits better depends on your current mortgage, your rate, how much equity you have, and your goals. Both use your home to back the loan, so the right choice is personal. A licensed lender can run your specific numbers, and it's smart to look at your current home's value and equity as a starting point.
Is tapping home equity the right move for you?
It can be a real relief for the right homeowner, but it isn't automatic. Because your home secures the loan, you want to be confident in the plan before you commit. Consult a licensed lender to compare a cash-out refi and a HELOC for your situation, and make sure the new payment fits your budget for the long haul.
If you're not sure where to start, I'm happy to walk you through your options and help you decide which path might be better. I'm C.W. Ross, The HomeCoach. Reach out to our team and let's get that gorilla out of the room.
Frequently Asked Questions
Can I use my home equity to pay off credit card debt?
Yes. If you own a home and have built up equity, a cash-out refinance or a HELOC can let you pay off high-interest cards, often at a lower rate. Because your home secures the loan, confirm the plan with a licensed lender first.
What is the difference between a cash-out refinance and a HELOC?
A cash-out refinance replaces your mortgage with a larger one and gives you the difference in cash, leaving one payment. A HELOC keeps your current mortgage and adds a separate line of credit you draw against. Both are secured by your home.
Why would I move credit card debt to home-based borrowing?
Card rates can run as high as 29.9%, while borrowing secured by your home typically carries a lower rate. Shifting the balance can reduce the interest you pay, but it puts your home on the line, so weigh it carefully with a licensed lender.
Is using home equity to pay off debt risky?
It can help, but your home is the collateral, so there's real risk if you can't keep up with the new payment. Make sure it fits your budget and talk to a licensed lender before deciding between a cash-out refi and a HELOC.