Home equity line of credit (HELOC) balances rose to $459 billion in the second quarter of 2026, according to the New York Fed. Many homeowners with equity and credit card debt are asking the same question: why pay 24% on a card when a HELOC costs a fraction of that? The math is compelling. The risk is real. Both deserve a careful look.
How a HELOC works
A HELOC is a revolving line of credit secured by your home. It usually has two phases:
- Draw period (often around 10 years): you can borrow and repay, and the minimum payment is frequently interest only.
- Repayment period: you can no longer draw, and payments cover principal and interest, often jumping sharply.
Most HELOCs have a variable rate tied to the prime rate, so the payment can rise when rates rise.
The math: $20,000 of card debt
Assume $20,000 of card balances at 24%, and a HELOC at 8.5%. HELOC rates vary widely by lender and credit, so treat 8.5% as illustrative.
| Plan | Monthly payment | Time to zero | Total interest |
|---|---|---|---|
| Cards at 24%, paid off in 5 years | $575.36 | 60 months | $14,521.54 |
| HELOC at 8.5%, paid off in 5 years | $410.33 | 60 months | $4,619.87 |
| HELOC at 8.5%, paid off in 10 years | $247.97 | 120 months | $9,756.59 |
| HELOC at 8.5%, interest-only minimum | $141.67 | Never | $1,700 a year, forever |
Paid off on the same five-year schedule, the HELOC saves almost $9,900. That is the case for it.
The bottom two rows are the warning. Stretch the HELOC to 10 years and most of the savings disappear. Pay only the interest-only minimum and the $20,000 never shrinks.
The risks you take on
- Your home becomes the collateral. Falling behind on a credit card hurts your credit. Falling behind on a HELOC can lead to foreclosure.
- Variable rate. If rates rise, so does the payment. Run your numbers at a rate two or three points higher.
- Interest-only minimums. The low required payment makes it easy to never pay off the principal.
- The cards are still open. If you run the balances back up, you end up with the HELOC and new card debt, plus less equity.
- Closing costs and fees. Some HELOCs have origination, appraisal or annual fees, or early closure fees.
- No tax break. Interest on home equity debt used to pay off credit cards is generally not deductible.
Questions to answer before you apply
- Can I pay the HELOC off in three to five years? Set your own payment on that schedule and treat the interest-only minimum as irrelevant.
- What happens if the rate rises 3 points? Make sure the payment still fits.
- What will I do with the cards? Lower the limits, freeze them or close the newest ones.
- Do I have an emergency fund? Without one, the next surprise expense goes back on a card.
- Is my income stable? If not, an unsecured option is safer.
Alternatives that do not involve your home
- The avalanche method: keep the cards and attack the highest rate first. Compare it with a HELOC payment using the snowball vs. avalanche calculator.
- A personal consolidation loan: a higher rate than a HELOC, but unsecured and with a fixed end date. Our consolidation vs. avalanche guide shows how to compare it fairly.
- A 0% balance transfer card, if the balance is small enough to clear within the promotion.
- A nonprofit debt management plan, which can lower card rates without a new loan.
The bottom line
A HELOC can be a powerful tool for someone with stable income, a firm payoff schedule and a plan to keep the cards at zero. It is a dangerous one for anyone likely to make only the minimum or to run the cards back up. Decide on the payoff date first, then decide whether the HELOC helps you hit it.