Using a HELOC to pay off credit cards: the math at 22% vs 8%

7 min read · LenderMatch Learn

Using a HELOC to consolidate debt can cut your interest cost sharply. Credit card accounts that paid interest were charged an average 22.15% APR in the second quarter of 2026 (Federal Reserve G.19), while a HELOC priced at the 7.00% prime rate plus an example 1.00% margin would be 8.00%. The trade-off is real: debt that was never tied to your house becomes debt secured by it.

On $30,000 of card debt, that rate gap is worth about $13,000 in interest over five years in the example below, if you pay the line down on a schedule. If you only make interest payments, the HELOC can end up costing more than the cards. Here is the math, the risks, and how a HELOC compares with a home equity loan and a cash-out refinance. When you're ready, you can compare HELOC offers from several lenders to see the margin you'd actually get.

Is it smart to use a HELOC to pay off credit card debt?

It can be, when three things are true:

• The rate gap is large. Your card rates are far above what a lender offers you on a HELOC, after fees.
• You'll pay it down on a schedule. You treat the HELOC like a fixed loan with a payoff date, not a line you carry for years.
• The cards stay paid off. The CFPB cautions that "taking on new debt to pay off old debt may just be kicking the can down the road." Consolidation only works if the old balances don't come back.

It is usually a poor fit if your income is unstable, if you're already behind on payments, or if you'd need to borrow close to the lender's limit to cover the debt. In those cases the risk to your home outweighs the interest savings.

Worked example: $30,000 of card debt at 22.15% vs an 8.00% HELOC

Assumptions: $30,000 in card balances at 22.15%, the Fed's Q2 2026 average for accounts assessed interest. HELOC at 8.00%: the 7.00% prime rate (October 20, 2026) plus an example 1.00% margin. Your margin may be higher, depending on credit and equity. Fees are not included.

Paying the HELOC off in five years saves about $13,370 in interest compared with the cards, and still saves about $12,500 if the rate climbs a full point. The last row is the trap. The CFPB notes that some HELOC plans allow interest-only payments during the draw period, which could last 10 years. Pay only $200 a month and you'd still owe the full $30,000 after a decade, then pay it off over 20 more years, for about $54,000 in total interest. That is more than the cards would have cost.

To test your own numbers, use the HELOC payment calculator and set a payoff period shorter than the draw period.

The real risk: unsecured debt becomes secured by your home

Credit card debt is unsecured. If you fall behind, your credit takes the damage and you may face collections, but no specific property backs the debt. A HELOC is different. The CFPB says plainly: "If you fall behind or can't repay the loan on schedule, you could lose your home." Its guidance on consolidation makes the same point about home equity loans used to pay off cards.

The CFPB lists other risks worth weighing:

• Less cushion. Equity you borrow "may not be available in an emergency."
• Falling prices. If home values drop, you could end up owing more than the home is worth, which can make selling or refinancing harder.
• A shrinking line. HELOCs generally let the lender freeze or reduce your credit line if your home's value falls or your finances get worse.
• A variable rate. "HELOCs usually have a variable interest rate, so your payments may change from month to month."

Pros and cons of using home equity to pay off debt

HELOC vs home equity loan vs cash-out refinance for debt consolidation

• HELOC. A revolving line, usually at a variable rate. Flexible, and you can borrow only what you need, but the same flexibility makes it easy to borrow again. Our guide on how a HELOC works covers draw and repayment periods.
• Home equity loan. One lump sum at a fixed rate with a set term. For a one-time payoff of known balances, a fixed payment and a firm end date can be easier to stick to.
• Cash-out refinance. Replaces your whole mortgage with a larger one. Freddie Mac says refinancing typically costs 3% to 6% of the loan principal, and you give up your current rate. With the 30-year fixed averaging 7.40% (Freddie Mac, week of October 15, 2026), that is rarely worth it just to clear cards if your existing rate is lower. See cash-out refinance vs HELOC for the full comparison.

HELOC vs personal loan for debt consolidation

The main difference is collateral. A personal loan is unsecured, so missing payments doesn't put your home at risk, but the rate is usually higher: commercial banks averaged 11.86% on 24-month personal loans in Q2 2026 (Federal Reserve G.19). A HELOC typically costs less because your home secures it, and that is exactly what raises the stakes. If the rate difference is small, the extra risk to your home may not be worth it.

Is HELOC interest tax deductible for debt consolidation?

No. IRS Publication 936 (2025) says interest on a loan secured by your home is not deductible as home mortgage interest when the money isn't used to buy, build or substantially improve the home. Paying off credit cards doesn't qualify, so compare rates without counting on a tax break.

How to use a HELOC for debt consolidation without backsliding

1. List every debt with its rate and payment. Consolidate only balances with rates well above the HELOC offer.
2. Borrow only what you need. Check how much room you have first with our guide on how much equity you can borrow or the home equity calculator.
3. Set your own payoff date. Pay principal every month, aiming to clear the balance well before the draw period ends.
4. Close the gap that created the debt. Put the paid-off cards away, and keep a cash cushion so an emergency doesn't go back on a card.
5. Compare the full cost. Ask each lender for its margin, rate cap, annual fee and closing costs, and compare offers side by side.

Frequently asked questions

Is it smart to use a HELOC to pay off credit card debt?

It can be, if the HELOC rate is well below your card rates, you pay the balance down on a fixed schedule, and you stop adding new card debt. It is a poor fit if your income is uncertain or the card balances are likely to come back, because the debt is now secured by your home.

How much can a HELOC save on credit card interest?

In our example, $30,000 at 22.15% paid off over five years costs about $19,868 in interest. The same $30,000 on an 8.00% HELOC, paid off over five years, costs about $6,498. That is roughly $13,370 less, before any HELOC fees, and assuming the rate stays at 8.00%.

Can I lose my house if I use a HELOC to pay off debt?

Yes. The CFPB warns that if you fall behind or can't repay a HELOC, you could lose your home. Credit card debt is unsecured; once it is moved onto a HELOC, your home is the collateral.

Is HELOC interest tax deductible if I use it to pay off credit cards?

No. IRS Publication 936 says interest on a loan secured by your home is not deductible as home mortgage interest when the money isn't used to buy, build or substantially improve the home.

HELOC or home equity loan for debt consolidation?

A home equity loan gives you one lump sum at a fixed rate and a set payoff date, which suits a one-time payoff. A HELOC has a variable rate and lets you borrow again, which is more flexible but makes it easier to run balances back up.

Does LenderMatch check my credit?

No. LenderMatch never pulls your credit. A lender you choose may check it, with your permission, when you apply.

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