Should I pay off my credit card debt with a home equity loan?

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.

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.

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.

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.

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.

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