Can you use a HELOC to pay off credit card debt? What to know

Credit card debt can trap you in a frustrating loop. You make payments month after month, but the high interest rates mean most of your money goes to interest — not to cutting down what you actually owe.

If you own a home, you might have an escape route. Home equity lines of credit (HELOCs) let you tap into your home's value at interest rates that are much lower than credit cards, potentially saving you thousands in interest if you make the switch.

This article breaks down everything you need to know about using a HELOC to pay off credit card debt, from pros and cons to how to get it done.

Is a home equity loan or HELOC better for credit card debt?

Home equity loans and home equity lines of credit (HELOCs) both use your home as collateral, but they work in very different ways.

Home equity loans give you a lump sum with a fixed interest rate and consistent monthly payments. You know exactly what you're paying each month for the entire loan term — in other words, no surprises. This predictability makes budgeting straightforward.

HELOCs work more like credit cards themselves, but with much lower interest rates. You get a line of credit to draw from as needed during your initial draw period, which is most commonly 5-10 years.

Here's a side-by-side comparison of the main differences between HELOCs and home equity loans:

Feature	HELOC	Home Equity Loan
Structure	Revolving line of credit	Lump-sum installment loan
Interest Rate	Usually lower than credit cards, but variable	Usually lower than credit cards and fixed
Best For	Ongoing or unpredictable expenses	One-time debt payoff
Monthly Payments	May be interest-only during draw period, then principal and interest	Fixed monthly payments for the full term
Flexibility	High (borrow as needed, repay, and reborrow)	Low (fixed amount, disbursed all at once)
Repayment Term	Draw period (5–10 years) and repayment period (10–20 years)	Fixed term (typically 5–30 years)
Budgeting	Less predictable due to variable rate and flexible borrowing	Easier to budget with fixed rate and payments
Closing Costs	May include closing costs or annual fees	May include closing and origination costs
Risk	Home is collateral, risk of foreclosure if you default	Same, home is collateral if you miss payments

How do you use a HELOC to pay off credit card debt?

So, can you use a HELOC to pay off credit cards? Yes, you can use your HELOC funds for anything you want — credit cards included.

If you decide to use a HELOC to pay off debt, you start by applying for one through a lender. They check your credit, appraise your home, and verify your income and existing debts. Many lenders will let you borrow a percentage of your home's value after subtracting what you still owe on your mortgage. For example, Better’s HELOC gives you up to 90%. In fact, Better has streamlined the HELOC application process so much that you could get your cash in as little as 7 days, sometimes with a total waiver of the appraisal cost and process.

Now, instead of making separate payments at high interest rates, you're making a single HELOC payment at a much lower interest rate — likely saving hundreds of dollars or more in interest each month. During the draw period, you’ll only need to make interest payments, though paying more reduces your principal faster and saves interest.

Pros of using a HELOC to pay off credit card debt

Is a HELOC a good idea to pay off debt? Using home equity to pay off credit cards comes with some significant benefits, including:

— Lower interest rates: HELOCs typically charge less than half the interest of credit cards. While credit cards often hit you with rates over 20%, HELOC rates average about 8%.

— Flexible drawing and repayment: With a HELOC, you can borrow only what you need. Plus, most options let you make interest-only payments during the draw period, giving your budget some breathing room.

— Credit score boost: Paying off credit cards with a HELOC lowers your credit utilization ratio and consolidates multiple payments into one, making it easier to avoid missed payments.

— One simple payment: Instead of balancing different credit card payments every month — each with its own due date and interest rate — you have just one monthly payment. It’s much easier to remember and include in your budget.

Once you've settled on a HELOC for getting rid of your credit card debt, Better's streamlined HELOC application takes just 3 minutes to check your eligibility. With competitive rates, no hidden fees, and access to $50,000-$500,000 of your home equity, you could have cash in as little as 7 days to wipe out those credit card interest black holes.

...in as little as 3 minutes – no credit impact

Cons of using a HELOC to pay off credit card debt

While HELOCs offer some great benefits for tackling credit card debt, they aren't without their downsides. These include:

— High risk: This is the biggest concern when using a HELOC. When you use a home equity line of credit to pay off credit cards, your home serves as collateral — meaning if you can't make payments, the lender could foreclose. Credit card debt might be stressful, but at least it doesn't put your home on the line.

— Variable interest rates: Most HELOCs come with variable interest rates that can increase over time. If rates jump significantly, your monthly payments could rise too.

— Fees and closing costs: When you take out a HELOC, you'll likely face closing costs of 2-5%, plus potential application fees, appraisal fees, or other costs.

— Potential for increased debt: With a new credit line available, you might be tempted to borrow more. It's not uncommon for homeowners to pay off their cards but then rack up new credit card debt while still owing on the HELOC, leaving them worse off than they were before. For this approach to succeed, use your HELOC funds to pay off your cards, and then be very careful about any further use.

— Extended repayment timeline: HELOCs spread repayment over a long time, often 15-20 years. Even with lower interest rates, this extended timeline could result in paying more total interest than a more aggressive approach to your credit card debt.

Alternatives to using a HELOC for credit card debt

If you’ve decided you shouldn’t get a HELOC to pay off debt, here are some other options to consider:

Personal loans

Personal loans come with fixed rates and set repayment terms without requiring collateral. They typically charge higher interest than HELOCs but lower than credit cards if you have solid credit.

The main advantage of this option is speed and simplicity. Some lenders approve same-day and fund within a week. Since they're unsecured, your home isn't at risk if you struggle with payments, though you generally can't borrow as much as with a HELOC.

Balance transfer credit cards

Balance transfer cards let you move high-interest credit card debt to a new card with a low or even 0% introductory rate for a limited time, like a year or 18 months.

These cards usually charge a transfer fee of about 3-5% of the transferred amount, but the interest savings can be huge, since your rate will be much lower.

Cash-out refinances

A cash-out refinance replaces your existing mortgage with a bigger loan, giving you the difference in cash. This debt consolidation option often comes with lower interest rates than HELOCs.

Better offers a handy HELOC versus cash-out refinance calculator that lets you quickly compare payments, rates, and potential savings between these popular options. Just plug in your numbers to see which approach might work better for your situation.

Home equity loans

Home equity loans hit the sweet spot between HELOCs and cash-out refinances. You leverage your home equity but swap the variable rate line of credit with a lump sum with a fixed interest rate and predictable monthly payments. These loans tend to have slightly higher interest rates than HELOCs at first, but they protect you from rate increases over time. 

Taking the next step with Better

If you've decided to take advantage of the lower interest rates HELOCs offer, you're on your way to potentially saving thousands of dollars in interest payments. The opportunity to convert high-interest credit card debt into a more manageable, lower-interest payment can dramatically improve monthly cash flow and accelerate your journey to becoming debt-free.

Better's quick and straightforward application takes just minutes to complete, with funds available in as little as 7 days. Check your eligibility today and start putting your home equity to work. With proper planning and disciplined spending habits, a HELOC could be the financial tool that helps you finally break free from credit card debt.

...in as little as 3 minutes – no credit impact