Should I Use a HELOC to Lower My Debt Payments?

A HELOC can lower your debt payments and cut your interest by more than half, but only if you stop adding new card balances and keep paying principal. Credit card accounts charged interest averaged a 22.15% rate in the second quarter of 2026, according to the Federal Reserve, while a HELOC is often priced at the prime rate (7.00% on October 22, 2026) plus a lender margin. The tradeoff is that the debt becomes secured by your home, so falling behind can lead to foreclosure, and the interest is not tax deductible when the money pays off other debt. If you are not sure you can hold to a payoff plan, a balance transfer card, a personal loan, or a nonprofit debt management plan keeps your home out of it.

For how a HELOC compares with other ways of borrowing against your home, start with what it means to refinance a mortgage.

How much a HELOC can save on credit card debt

Take $20,000 of card debt at the 22.15% average rate. The HELOC in this example charges 8.00%, which assumes a margin of 1 percentage point over prime; your margin depends on your credit, your equity, and the lender. How your HELOC rate is calculated explains the index and margin.

Paying the same $600 a month on the HELOC saves about $8,643 and clears the debt 15 months sooner, before fees. The CFPB notes that closing costs on home equity borrowing can run from hundreds to thousands of dollars, and some HELOCs add appraisal, application, or annual fees, so subtract those from the savings.

The last row is how a lower payment turns into a higher cost. Some HELOCs allow interest-only payments during the draw period, the years when you can borrow from the line. Paying $133.33 a month frees up cash, but after 10 years you have paid $16,000 in interest and still owe the full $20,000.

The risk of putting card debt on your home

Credit card debt is unsecured: no property backs it. If you stop paying, the card issuer can damage your credit and sue you, and generally only after winning in court can it garnish wages or place a lien on property. A HELOC is secured by your house. The CFPB's HELOC booklet says that if you fall behind or cannot repay on schedule, you could lose your home.

Two more conditions change the math:

• Running the cards back up. The CFPB warns that if your debt comes from spending more than you earn, a consolidation loan probably will not help unless you cut spending or raise income. Paying off cards with a HELOC and then charging them again leaves you with both debts.
• The lender can shrink the line. HELOCs generally let the lender freeze or reduce your credit line if your home's value falls or your finances worsen. That matters if you planned to draw more later.

If you are struggling with your mortgage payment as well, the CFPB recommends talking to a HUD-approved housing counselor before borrowing against your home. You can reach one through the CFPB at (855) 411-2372.

Why the interest is not tax deductible

HELOC interest is deductible only when you spend the money to buy, build, or substantially improve the home that secures the line, according to IRS Publication 936. Paying off credit cards, medical bills, or a car loan does not qualify, so the full 8.00% in the example is your real cost. Compare the HELOC rate directly against the card or personal loan rate, with no tax adjustment. Other uses that do and do not qualify are covered in the most common reasons to use a HELOC.

What happens to your payment when the draw period ends

When the draw period ends, the HELOC enters the repayment period. The CFPB booklet says lenders often set repayment over 10 or 15 years, and some plans instead require the entire balance at once, called a balloon payment. If you cannot pay or refinance a balloon, you could lose your home.

Using the same $20,000 balance:

• During the draw period, interest-only at 8.00%: $133.33 a month.
• 10-year repayment at 8.00%: $242.66 a month, an 82% jump with no new borrowing.
• 10-year repayment if the rate has risen to 10.00%: $264.30 a month.

Because the rate is variable, the payment can rise even during the draw period. Before you sign, ask each lender for the draw period length, the repayment terms, whether a balloon applies, and the rate cap. The full list of HELOC tradeoffs is in the drawbacks of a HELOC. If you want a fixed payment for a fixed amount of debt, compare a home equity loan, covered in whether to choose a HELOC or a home equity loan.

Alternatives that do not use your home

Balance transfer card. The CFPB says the transfer fee is usually a percentage of the amount moved or a flat amount, whichever is more. For example, with a 3% fee, moving $20,000 costs $600, and clearing $20,600 during an 18-month 0% promotion takes about $1,145 a month. New purchases on that card may get no grace period, and a payment more than 60 days late can let the issuer raise the rate on the whole balance.

Personal loan. A $20,000 loan at 11.86% over 36 months costs $662.95 a month and $3,866 in interest. The same 36-month payoff on the 8.00% HELOC costs $626.73 a month and $2,562 in interest. The $1,304 difference, before HELOC fees, is what you pay to keep your house out of the debt. The CFPB notes that a lower consolidation payment often comes from a longer term, so compare total interest as well as the monthly figure.

Nonprofit credit counseling. In a debt management plan, you make one monthly deposit with a credit counseling agency, and the counselor pays your unsecured debts on a set schedule. The FTC says creditors may agree to lower your rates or waive fees, the plan can take 48 months or more, and nonprofit status does not guarantee low fees, so ask for one-time and monthly fees in writing. Avoid debt settlement companies that charge up-front fees; the FTC warns they can leave you owing more in late fees and interest.

A HELOC is the stronger choice when you have stopped adding card debt, can pay enough principal to clear the balance well before the draw period ends, could still afford the payment if the rate rose 2 percentage points, and the savings beat a personal loan by more than the HELOC's fees.