Haunted by Credit Card Debt? Home Equity May Help

Is your credit card debt creeping up on you like a ghost in the night? A high balance — and the stress of not being able to pay it off — can feel downright terrifying. But if you're a homeowner, there's a potential lifeline: your home equity.

Using home equity to pay down high-interest credit card debt can be a smart move, but it’s not without risks. Before you take the plunge, let’s walk through the pros and cons of this strategy to help you decide if it’s the right path forward.

Running the Numbers

As of July 2025, the average credit card interest rate was over 21%[1], with some cards running as high as 33%[2]. That’s a serious drain on your wallet if you’re carrying a balance month to month and only making minimum payments. Meanwhile, the average home equity loan rate is about 7.5%[3].

But how much debt justifies tapping into your home equity? Most lenders require a minimum loan amount, which can range from $10,000 to $35,000, according to Experian.[4] That means using home equity only makes sense if you're consolidating a significant amount of debt.

The chart below illustrates how much interest you could pay on $25,000 in credit card debt — and how much you might save by switching to a home equity loan.

	Credit Card (Interest Rate/APR 21%)	Home Equity Loan (Interest Rate 7.50%, APR** 7.50%)
Balance	$25,000	$25,000
Monthly Payment	$750*	$501
Time to Pay Off	~30 years	5 years
Total Interest Paid	$34,557.15	$5,057
Total Paid	$59,557.15	$30,057

*This assumes an initial monthly payment, calculated as 3% of the outstanding credit card balance. The monthly payment will decrease as the balance is paid down. This can greatly increase the length of time it takes to pay off your credit card. All examples are hypothetical and are for illustrative purposes. This is not a commitment to lend. Not all borrowers will qualify. The figures above do not represent actual terms being offered. Please consult with your lender for an estimate specific to your scenario.

Home Equity Loan vs. HELOC: What’s the Difference?

When you tap your equity, you’re essentially borrowing from yourself and then paying yourself back. There are two common ways to do this.

1. Home equity loan (HEloan): This is a one-time loan that you repay over a fixed term (like 5, 10, or 15 years) at a fixed interest rate.

2. Home equity line of credit (HELOC): This is a revolving line of credit that works like a credit card. You’re approved for a maximum credit limit and can borrow as needed during a “draw period” (typically 5 to 10 years). After that, you enter a repayment period. These typically have a variable rate that fluctuates over time.

Like any loan, however, there are both benefits and risks to tapping home equity.

Benefits

1. Lower Interest = Lower Payments: Swapping a 21% interest rate for a 7.5% rate can save you thousands in interest over time.

2. Simplified Finances: Instead of juggling multiple credit card payments, you’ll have one monthly payment.

3. Potential Credit Score Boost: Paying off revolving credit card debt can lower your credit utilization ratio, which may improve your credit score.

Risks

1. Your Home Is on the Line: Credit card debt is unsecured, which means it’s not tied to an asset that you would lose if you defaulted on payments. A home equity loan is secured by your house. If you can’t make the payments, you could lose your home, even if you’re current on your mortgage payments.

2. Closing Costs and Fees: Home equity loans may come with upfront costs, like appraisal fees, origination fees, and more.

3. Temptation to Re-Spend: If you don’t change your spending habits, you could end up with maxed-out credit cards and a home equity loan.

How Do You Decide?

The temptation to run up more credit card debt after taking a home equity loan is serious. Many people fall into this trap, because they don’t change their spending habits. Before you tap your equity, take a serious look at your money management skills, and consider learning more about smart budgeting and saving plans.

But if you have stable income, steady employment, and a plan to avoid racking up new debt, using home equity to pay off credit card debt can be a powerful financial move. Talk to your Loan Officer to learn more about home equity options.

---

Sources:

[1] Federal Reserve Economic Data (FRED), Federal Reserve Bank of St. Louis, Commercial Bank Interest Rate on Credit Card Plans, All Accounts, May 2025.

[2] WalletHub, “Average Credit Card Interest Rates by Credit Score,” June 16, 2025.

[3] ICE Mortgage Monitor, June 2025.

[4] Experian, “What’s the Smallest Home Equity Loan or HELOC You Can Get?” April 28, 2022.

This information is not intended as financial advice. You should consult a financial advisor to devise a financial strategy that works best for your situation.

The following loan scenario is for illustrative purposes only: If a borrower with a 700 FICO score and 78% loan-to-value (LTV) obtains a home equity loan with a fixed interest rate of 7.50% (assumed APR of 7.50%), the repayment terms would include a monthly principal and interest payment of $501. The illustration assumes no additional costs involved in the loan transaction including points, fees, processing fees, etc. The actual obligation will be greater. All loans are subject to credit and property approval. Certain restrictions may apply.

**Interest Rate/APR: The sample rates shown are neither an advertisement, an estimate, nor an offer to lend. The annual percentage rate (APR) is the cost of credit over the term of the loan expressed as an annual rate. The APR shown is based on the interest rate and does not take into account any loan-specific finance charges you may be required to pay. Rates are for illustrative purposes only. Actual rates may vary.