What to Do About Credit Card Debt With a Home Equity Loan?

by HomeLoan.com

A home equity loan can be used to pay for credit card debt.
When you are overwhelmed with credit card debt and are tired of paying high interest rates for several cards, you can use the equity in your home to take out a home equity loan and use it to consolidate your credit debt. This gives you only one payment and at a much lower interest rate than the credit cards.


When you take out a loan on a house and pay it off over time, the value of your home minus the amount you still owe on the property is your equity. It is possible to take out a second mortgage from the bank using that equity to pay off credit card debt and alleviate the stress associated with the debt.

Payment Plan

The most obvious thing to do with your credit card debt and a home equity loan would be to pay off all the balances. This allows you to start fresh and make one monthly payment to the bank. If you are behind on the cards, the accounts will be closed and you can begin anew with making regular payments on the bank loan.


If you don't want to use the entire home equity loan to pay off your total credit card debt, you can pay as much as you need to get caught up and spend the rest on home improvements, vacations, etc. You should be careful not to get overextended because if you get behind on the equity loan, you can lose your house.

Regular Payments

If you want to rebuild your credit and have several credit cards, you can use the money from the home equity loan to pay the credit cards every month. This will allow you to make the payments on time regardless of your pay period or financial situation. You can improve your credit score by making the payments on all the credit cards and the new equity loan.


Some home equity loans will require the payment of a balloon payment at the end of the loan term. The balloon payment can be several thousand dollars and if you don't pay, then the house may be sold to pay for the balloon payment. It is important that when you start the loan, that you have a way to save for the balloon payment when the time comes.

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