Using a home equity loan to tackle credit card debt: A guide

Credit card debt can be some of the most painful debt to deal with. Interest rates can be quite high, and it can take years to pay down your balance. If you have expensive credit card debt and own your home, you might consider using your home equity to help pay off your credit card debt.

Home equity loans tend to come at much lower interest rates than credit cards. That means using your equity to pay off your credit card debt can be a good option for some people who want to save money. However, it’s not right for everyone.

We’ll break down how home equity loans work, the benefits of using them to pay off credit card debt, the risks involved, and how to decide if it’s the right move for you.

Home equity loans, explained

A home equity loan^1,2 is a type of second mortgage. It lets you borrow money against the equity you’ve built in your home.

Equity is the difference between your home’s value and the outstanding mortgage and other debt you have against the home. You build equity as the home appreciates in value and as you make your down payment and monthly payments toward your mortgage.

Home equity loans are flexible in that you can use them for almost any purpose. Like a mortgage, once you get a home equity loan, you pay the loan back in, typically fixed, monthly payments. Because home equity loans are additional loans on top of your mortgage, that means you have two separate loans and two loan payments to make.

Using a home equity loan to tackle credit card debt

You can use a home equity loan for many purposes, including debt consolidation. When you consolidate debt, you take out a new loan – in this case, a home equity loan – and use the proceeds to pay off multiple other loans. This leaves you with a single monthly payment, hopefully at a lower interest rate.

If you want to use your home equity loan to pay off credit card debt, follow these steps:

• Assess your financial situation. Take stock of the equity you have in your home and the balances of your credit cards. Ideally, you’ll have more than enough home equity to pay off your credit cards.
• Consider why you have credit card debt. Think what contributed to your credit card debt. Often, it can happen due to financial emergencies like an unexpected hospital bill that you have to pay. Try to come up with a plan to avoid falling into debt again, such as building an emergency fund or designing a budget that includes setting money aside for future use.
• Compare other debt consolidation solutions. You want to get your credit card debt under control. Finding a way to consolidate the balances into a single loan with a lower interest rate is often worthwhile. While a home equity loan is one solution, an unsecured personal loan is another option to consider.
• Research lenders. If you determine that a home equity loan is the right fit, it’s time to shop around. Seek out a lender offering the most attractive loan terms for your situation.
• Get prequalified. A potential lender will ask for some basic information about your financial situation. For those with a solid financial standing, it might be easy to get prequalified.
• Apply. If you like the offer you received, finalize your application for a home equity loan.
• Pay off your credit cards. If approved for the loan, use the proceeds to pay off your credit card balances.

Benefits and drawbacks of using a home equity loan for credit card debt

Home equity loans can be a good way to consolidate debt, but they’re not the best choice for everyone. There are some reasons to look for other ways to pay off your debt or to keep your balances on a credit card.

Benefits

Using a home equity loan to pay off your credit card is likely to save you money and can make the process a bit simpler. Consider these advantages of consolidating your debt.

• You’ll have a lower interest rate. Most credit cards come with high interest rates, with an average of 25.32% as of the first week of November 2025. However, a home equity loan typically comes with much lower interest rates. So you can borrow money and pay much less interest.
• There will only be one bill to pay. Paying off several credit card balances with a home equity loan cuts down on the number of monthly payments.
• It will lock in your repayment plan. Credit cards have a variable rate and changing payment terms. But home equity loans allow you to lock in a predetermined monthly payment for the duration of your loan.
• You’ll know when you’ll be out of debt. With a set repayment term, you’ll know exactly how long it will take to get out of debt if you stick to the term.

Drawbacks

While consolidating debt with a home equity loan can save you money, keep these risks in mind.

• You risk losing your home. When you take out a home equity loan, your home is used as collateral. If you cannot keep up with the payments, then the lender could foreclose on your home.
• A new loan may impact your credit score. When you apply for a new loan, your credit score might fall.
• You could end up in more debt. Consolidating your credit card debt might make mathematical sense. But if you don’t change your spending patterns, you could end up accumulating more debt on your credit cards after consolidation.
• You could face fees. When you apply for and close on a home equity loan, you are going to pay closing costs and fees. These can cut into your overall savings.

Alternative methods for paying down credit card debt

Using a home equity loan to consolidate your credit card debt is just one way to pay off your balances. If you’re not sure it’s right for you, consider these other options.

• Refinance: If you refinance your home loan, you’ll essentially replace your existing mortgage with a larger one and pocket the difference. You can use those funds to pay off your credit cards without adding a separate home equity loan payment to your budget.
• Home equity line of credit (HELOC): A HELOC is a type of revolving credit that allows you to borrow against your home equity on an as-needed basis. You can use the funds to pay off your credit card balances. Rocket Mortgage doesn’t offer HELOCs at this time.
• Debt snowball method: The debt snowball method doesn’t involve any debt consolidation strategies. Instead, the focus is on paying off your smallest credit card balance with any money you have available in your budget. As you pay off your debts, you can redirect that minimum payment into your next credit card balance and eliminate your debt ahead of schedule.
• Balance transfer credit card: A balance transfer credit card allows you to move your debt to a new credit card. In general, these cards offer a 0% introductory period, which can give you a chance to make significant headway on your payoff plan.
• Debt consolidation loan: A debt consolidation loan is a type of personal loan that doesn’t require collateral. With that, you won’t have to put your home on the line to consolidate your credit card debt into a single payment.

HELOCs vs. home equity loans for debt consolidation

A home equity line of credit (HELOC) is another type of loan that lets you get equity out of your home. Unlike home equity loans, HELOCs give you a pool of cash you can draw from multiple times, on an as-needed basis. In that way, they work much like credit cards.

In general, HELOCs are good when you need flexible access to cash for ongoing or unpredictable expenses. They usually have variable interest rates, so they are less predictable than home equity loans.

That flexibility can be valuable in many scenarios, such as if you want access to cash in case of an emergency or phased home renovations.

With a HELOC, your lender may allow you to borrow up to 85% of your home’s value, depending on your credit history and other requirements.

When paying down debt, the predictability of payments and fixed interest rates offered by a home equity loan might make more sense, depending on your personal situation.

FAQ

Using home equity to pay down credit card debt involves a few steps. It’s important to make sure you understand the process before you decide to apply for a loan.

Can you use a home equity loan to consolidate credit card debt?

Yes, you can use a home equity loan to consolidate credit card debt. These loans are highly flexible, and you can use the money you borrow for almost any purpose. They are not like other loans, which are designed for specific purposes.

How do you qualify for a home equity loan?

To qualify for a home equity loan, you’ll need to have sufficient equity in your home and be able to show your lender that you’re a safe borrower, typically by showing that you have solid credit and stable finances. In general, you’ll need at least 20% equity in your home, and your borrowing limit will not let you drop below 20% equity.

What’s the best way to get credit card debt under control?

Debt consolidation is one option for getting credit card debt under control, letting you reduce the cost of your debt. After all, while credit cards charge more than 21% interest, as of November 2025, home equity loan rates can be as low as 7.9%.

 In the long term, the best way to make progress is to pay your balances down aggressively and adjust your spending habits so that you don’t wind up in credit card debt again. That may mean building an emergency fund to cover unexpected costs or following a budget to help you stop overspending.

The bottom line: Using your home equity may help you consolidate debt

If you own a home and want to pay off other types of debt, such as credit card debt, a home equity loan is one option available to you. Home equity loans have lower interest rates than credit card debt, which means you can save money. However, keep in mind that you’re trading unsecured debt for secured debt, which means you’re putting your home at risk. Before using home equity to consolidate debt, make sure you’re confident in your ability to make your monthly loan payments.

If you’re ready to apply for a home equity loan, you can apply for one with Rocket Mortgage.

¹Home Equity Loan product requires full documentation of income and assets, credit score and max loan-to-value (LTV), combined loan-to-value (CLTV), and home equity combined loan-to-value (HCLTV) ratios. Requirements were updated 11/19/25 and are tiered as follows: 680 minimum FICO with a max LTV/CLTV/HCLTV of 80%, 700 minimum FICO with a max LTV/CLTV/HCLTV of 85%, and 740 minimum FICO with a max LTV/CLTV/HCLTV of 90%. Your debt-to-income ratio (DTI) must be 50% or below. Valid for loan amounts between $45,000.00 and $500,000.00 (minimum loan amount for properties located in Michigan is $10,000.00). Product is a second standalone lien and may not be used for piggyback transactions. Product not available on Ameriprise products. Guidelines may vary for self-employed individuals. Some mortgages may be considered “higher priced” based on the APOR spread test. Higher priced loans are not allowed on properties located in New York. Additional restrictions apply. This is not a commitment to lend.

²Refinancing may increase finance charges over the life of the loan.