It’s unique to you how you opt to pay off debt – not every strategy works for each person. Through the use of the debt avalanche or debt snowball approaches, some people handle their debt, while some focus on debt consolidation. 

You may want to try using your home equity for debt consolidation if you own your home. A home equity loan line of credit could be a good tool to help you with mounting debt. 

Read on to discover when you can tap into your home’s equity for debt consolidation.

Learn How to Get a HELOC to Consolidate Debt
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What Is a Home Equity Line of Credit (HELOC)?

Another form of a loan against equity that can be used to pay off debt is a HELOC. Comparable to a credit card, you get a line of credit depending on your available equity, and when needs arise, you draw from that line of credit. 

If you are struggling financially, the advantage of the HELOC method is that you only pay interest on the component of the credit line you use, rather than the full amount lent on a home equity loan.

An Example

For instance, if you were eligible for a $30,000 HELOC based on your home equity, and you used $20,000 of it to get a new roof, interest payments will only accumulate against the $20,000, leaving $10,000 to borrow against. 

HELOCs are deemed revolving credit, so you can borrow against it again after you’ve repaid it. 

Be cautious of HELOC terms that enable you to pay only the interest on the amount lent over a specific time before transitioning to a conventional home equity loan. Your monthly outgo will skyrocket if you have not been paying down the balance all along.

HELOC to Consolidate Debt

HELOCs are credit lines, meaning when you want, you use as much of a pre-approved loan amount as you want. The money you can loan is dependent on a variety of aspects, such as the amount of equity that you have in your home, the credit score, and your salary.

To determine how big a credit line it will provide and at what interest rate, the lender will evaluate your credit ratings and the local real estate market. 

The sum can be considerably less than your home equity. Normally, lenders demand that you keep at least 20% equity in your estate.

Types of Debt That Can Be Consolidated

Learn How to Get a HELOC to Consolidate Debt
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Sometimes, lenders need to know your purpose for getting a home equity loan. One purpose is debt consolidation for credit cards, but you may want to use the cash to make an addition to your home. Expect queries on this. 

Before, lenders favored equity loans be used to make home renovations, contributing to the value of the property used as collateral, but nowadays, that is not the case.

Generally speaking, there are no limits on how you use a HELOC. It’s fine if you want to consolidate debt by paying off a car loan and credit card debt. The lender is just worried that, as per the terms of the line of credit, you pay interest and principal.


It may work for some people to get a home equity loan to pay off debt, but if you don’t want to position your home on the line, then consider alternatives. 

For a more secure future, making a plan for how you’ll handle high-interest debt and how you’ll settle your HELOC can establish your finances. Make sure to consider this information if you are considering getting a HELOC.