Can Home Equity Help With Debt Payments?

Can Home Equity Help With Debt Payments?

When to use a home equity loan to pay off debt.

Debt can be daunting. If you’ve been struggling to get out of debt, you may consider a home equity loan. Here’s what you should know before you do.

If you’re considering using your home’s equity to manage debt, it’s important to understand your options—and how they fit your overall financial picture. A home equity loan is a loan that is backed by the collateral of equity in your home. All loans have both advantages and disadvantages. We’ve laid out a few here: 

Advantages of Using Home Equity

• Lower Interest. When you take out a home equity loan, you’re putting your home up as collateral. Home equity loans typically have a lower interest rate than credit cards. The average home equity loan interest rate is currently around eight percent, while, average credit card interest rate is about twenty percent. Your home equity loan rate is also fixed, while a credit card is variable. 
• Low Payments. A low interest rate means a low monthly payment. That could help you deal with the debt faster.
• One Payment. If you use a home equity loan to pay off debt, you’ll have one monthly payment instead of multiple payments to worry about. That can streamline the process and make things less stressful.

For members who want added flexibility, our Flex Equity line of Credit allows you to access your home’s equity with competitive rates and adaptable repayment options, helping you manage debt strategically while maintaining control over your finances. You can also take a portion of your balance as a fixed-rate advance, giving you predictable payments and protection from rate changes—while still maintaining the flexibility of your line of credit.

Disadvantages of Using Home Equity

• Home as Collateral. With your home as collateral, there is always the risk that you could lose your house. That’s about as serious a penalty as it gets. Also, if you end up selling your home while you still owe money on the loan, you’ll have to pay the entire balance at once.
• Fees. As with other types of loans, home equity loans typically also have fees. Some loans even come with yearly maintenance fees. If you are considering a home equity loan, ask about any applicable fees associated with the loan.

Do One Thing: Consider all methods of dealing with debt before making any decisions. Reviewing your credit and exploring options like a Home Equity Loan or Flex Equity line of Credit can help you choose the solution that best fits your goals.

Not sure where to start? Begin with a Free Credit Report Review. Our team can help you understand your current credit profile, identify opportunities to improve it, and determine whether using your home’s equity—or exploring other ways to pay off debt—is the right decision for you.

Home Equity Options Free Credit Report Review