How much can I save by consolidating my debt with a home equity loan?

Savings depend on your current interest rates and loan terms. Typical credit card rates of 18-30% compared to home equity rates of 7-11% can save thousands annually. Use our calculator above to estimate your specific savings.

Should I use a HELOC or home equity loan for debt consolidation?

Home equity loans are usually better for debt consolidation because they offer fixed rates and forced repayment schedules. HELOCs with variable rates can increase your payments over time.

What happens if I can't make payments on my home equity loan?

Since your home secures the loan, the lender can foreclose if you default. This is why it's crucial to ensure you can afford the payments and have stable income before consolidating.

Can I consolidate student loans with a home equity loan?

While possible, it's generally not recommended. Student loans offer protections like deferment, forbearance, and forgiveness programs that you'd lose by consolidating with home equity.

How long does the debt consolidation process take?

The home equity loan application and approval process typically takes 30-45 days. You can start paying off debts immediately after closing.

Will consolidating debt hurt my credit score?

Initially, the hard credit inquiry may lower your score slightly. However, paying off credit cards and reducing utilization typically improves your credit score over time.

Debt Consolidation with Home Equity

Turn your home's equity into a solution for high-interest debt

Calculate Your Savings

What is Home Equity Debt Consolidation?

Debt consolidation with home equity involves using a home equity loan or HELOC to pay off multiple high-interest debts, combining them into a single, lower-interest payment secured by your home's value.

Before Consolidation

Credit Card 1:$8,000 @ 24.99%

Credit Card 2:$5,000 @ 22.49%

Personal Loan:$12,000 @ 18.99%

Auto Loan:$15,000 @ 8.99%

Total Debt:$40,000

Total Monthly:~$1,200

After Consolidation

Home Equity Loan:$40,000 @ 8.50%

Loan Term:15 years

Monthly Payment:$394

Monthly Savings:~$806

Interest Savings:$150,000+

Benefits and Risks

Benefits

Lower Interest Rates

Home equity rates (7-11%) are typically much lower than credit card rates (18-30%), potentially saving thousands in interest.

Single Monthly Payment

Simplify your finances by replacing multiple payments with one convenient monthly payment.

Fixed Payment Option

Home equity loans offer predictable fixed payments, making budgeting easier.

Potential Tax Benefits

Interest may be tax-deductible if used for qualifying home improvements (consult tax advisor).

Improved Credit Score

Paying off credit cards can improve your credit utilization ratio and boost your credit score.

Access to Larger Amounts

Home equity loans can provide access to significant funds based on your home's value.

Risks & Considerations

Your Home is Collateral

Failure to make payments could result in foreclosure. This is the most significant risk to consider.

Closing Costs

Expect 2-5% of loan amount in closing costs, which could offset some initial savings.

Temptation to Overspend

Paid-off credit cards may tempt you to accumulate debt again, potentially doubling your debt burden.

Longer Repayment Period

While monthly payments are lower, extending repayment to 15-30 years may increase total interest paid.

Reduced Home Equity

Using your equity reduces the cash you'd receive if you sell your home.

Variable Rate Risk (HELOCs)

HELOC rates can increase, potentially making payments higher than original debts.

When Debt Consolidation Makes Sense

Good Candidates For Consolidation

✓High-interest debt (credit cards, personal loans)
✓Stable income and employment
✓Sufficient home equity (20%+ recommended)
✓Good credit score (680+ for best rates)
✓Discipline to avoid accumulating new debt
✓Plan to stay in home for several years

Poor Candidates For Consolidation

✗Unstable income or job insecurity
✗Little or no home equity
✗Poor credit score (<620)
✗History of overspending or poor financial habits
✗Planning to sell home within 2-3 years
✗Unable to afford higher monthly payments initially

Break-Even Analysis

3-5%

Interest rate difference needed to justify consolidation

2-3 years

Time to recoup closing costs through savings

$10,000+

Minimum debt amount where consolidation typically makes sense

Calculate Your Consolidation Savings

See how much you could save by consolidating your debts with a home equity loan

Debt Consolidation Calculator

Current Debt Scenario

Credit Card 1 ($10,000 @ 24.99%):$299/month

Credit Card 2 ($8,000 @ 22.49%):$232/month

Personal Loan ($15,000 @ 18.99%):$378/month

Total Monthly Payments:$909

Total Interest (5 years):$21,540

After Home Equity Consolidation

Home Equity Loan ($33,000 @ 8.5%):$326/month

Loan Term:15 years

Monthly Savings:$583

Total Interest (15 years):$25,680

Interest Savings vs Current:$39,000+

Get Your Personal Quote

Get personalized rates and payment estimates

Debt Consolidation Process

Assess Your Current Debt

Create a comprehensive list of all your debts including balances, interest rates, and monthly payments.

What to Include:

• Credit card balances and rates
• Personal loans
• Auto loans (optional)
• Student loans (consider carefully)
• Medical debt
• Store credit cards

Determine Your Home Equity

Calculate how much equity you have available for consolidation.

Home Value Assessment:

• Online valuation tools
• Recent comparable sales
• Professional appraisal
• Real estate agent opinion

Equity Calculation:

• Current home value
• Minus mortgage balance
• Equals total equity
• 80% LTV = borrowable amount

Shop for the Best Rates

Compare offers from multiple lenders to find the best terms for your situation.

Traditional Banks

Established relationships, full service

Credit Unions

Often competitive rates for members

Online Lenders

Fast approval, competitive rates

Apply and Get Approved

Submit your application with all required documentation.

Application Tips:

• Apply to multiple lenders within 14-45 days to minimize credit impact
• Don't pay off debts until loan closes
• Maintain employment stability during process
• Avoid large purchases or new credit applications

Pay Off Existing Debts

Use your home equity loan proceeds to pay off all targeted debts.

Best Practices:

• Pay highest interest rate debts first
• Confirm payoff amounts before sending payments
• Keep confirmation receipts
• Close credit cards if necessary

Avoid These Mistakes:

• Don't run up credit cards again
• Don't miss any loan payments
• Don't use remaining equity carelessly
• Don't ignore budgeting and planning

Alternatives to Home Equity Consolidation

Personal Loans

Pros: No collateral required, faster approval

Cons: Higher interest rates, lower loan amounts

Best for: Smaller debt amounts (<$50,000)

Balance Transfer Credit Cards

Pros: 0% intro APR offers, no closing costs

Cons: Promotional rates expire, credit limits

Best for: Good credit, ability to pay off within promo period

Debt Management Plans

Pros: Professional guidance, negotiated rates

Cons: Credit impact, fees, longer payoff

Best for: Struggling with multiple debts, need professional help

DIY Debt Elimination Strategies

Debt Snowball Method

Pay minimums on all debts, focus extra payments on smallest balance first. Builds momentum and motivation.

Debt Avalanche Method

Pay minimums on all debts, focus extra payments on highest interest rate first. Saves most money mathematically.

Debt Consolidation FAQ

Common questions about using home equity for debt consolidation

Start Your Debt Consolidation Journey

Get quotes from multiple lenders and compare your options

Get Home Equity Loan Quotes Get HELOC Quotes

No obligation • Secure application • Compare multiple offers