Pay Off Debt with Home Equity: How to Eliminate Credit Card, Student Loan, or HELOC Balances and Save Thousands
Many homeowners today are sitting on more home equity than ever - yet still juggling high-interest credit card, student loan, or personal debt. What most don't realize is that their home's equity could be the key to wiping out those balances, reducing stress, and saving hundreds (even thousands) of dollars a month.
Let's break down how using your home equity strategically can turn your debt into long-term financial stability.
What It Means to Use Home Equity to Pay Off Debt
When you tap into your home equity - either through a cash-out refinance or a home-equity loan - you're leveraging the value you've built in your home to consolidate higher-interest debts into a single, lower-rate payment.
Essentially, you're replacing expensive debt (like credit cards or student loans) with a secured, lower-rate mortgage product - improving cash flow and simplifying your finances.
This strategy can make sense for borrowers who have:
- High-interest revolving or installment debt
- Sufficient equity in their home
- Steady income to manage a single, predictable payment
According to the Consumer Financial Protection Bureau (CFPB), home equity represents the portion of your property that you truly own - and leveraging it responsibly can be one of the most effective ways to improve your financial position.
Why It Works
1. Significantly Lower Interest Rates
Mortgage and home-equity loan rates are often a fraction of what credit cards charge. Even a small rate difference can save thousands over the life of the loan.
2. One Monthly Payment
Instead of keeping track of multiple due dates, balances, and interest rates, consolidating debt into a single mortgage payment brings simplicity - and peace of mind.
3. Cash Flow Relief
By spreading repayment over a longer term, your total monthly outlay can drop dramatically - f
Why Homeowners Use This Strategy
1. Lower Interest Costs
Credit cards often carry rates of 20% or more, while mortgage-based products typically offer much lower interest rates. Over time, this difference can save you thousands in interest.
2. Simplified Finances
Instead of juggling multiple due dates and interest rates, consolidating debt into one predictable monthly payment brings simplicity and peace of mind.
3. Improved Cash Flow
By stretching repayment over a longer term, homeowners can dramatically reduce total monthly obligations - often freeing up hundreds of dollars in monthly cash flow.
4. Long-Term Payoff Plan
Unlike revolving debt, a mortgage or home-equity loan has a clear payoff timeline, making it easier to become debt-free over time.
For a full guide to converting your home's equity into financial opportunity, see:
👉 Cash-Out Refinance in Wisconsin - Turn Equity into Opportunity.
reeing up cash for savings, investing, or just breathing room in your budget.
4. Build Toward Stability
Unlike revolving credit card debt, a mortgage or home-equity loan has a clear payoff timeline. That structure can help homeowners finally escape the endless interest cycle.
Example: Consolidating Debt Using Home Equity
Let's say a homeowner has the following debts:
| Type of Debt | Balance | Average Interest Rate | Monthly Payment |
|---|---|---|---|
| Credit Cards | $20,000 | 21% | $600 |
| Student Loans | $15,000 | 8% | $180 |
| Personal Loan / HELOC | $10,000 | 10% | $250 |
| Total Monthly Payments | - | - | $1,030 |
Now imagine that same homeowner has $150,000 in home equity and decides to refinance or take out a cash-out home-equity loan to consolidate all debt.
With a fixed-rate home-equity loan or refinance structured over 15 - 20 years, the new combined monthly payment could be roughly $400 - $500 - depending on rate, term, and credit profile.
That's a savings of roughly $500 - $600 per month - and a plan that finally pays off debt instead of spinning it forward month after month.
When to Consider This Strategy
- You have multiple debts with high interest rates
- You have at least 20% equity in your home (or more)
- You have stable income and plan to stay in your home for several years
- You're committed to not racking up new unsecured debt
When to Think Twice
This isn't right for everyone. Using your home as collateral requires discipline - because if you stop making payments, you risk foreclosure.
You should avoid this route if:
- You're planning to sell or move soon
- You're uncertain about job stability or income
- You might continue using credit cards after consolidating
- You're already behind on mortgage payments
For a breakdown of refinancing options available to Wisconsin homeowners, see:
👉 Refinance Your Mortgage in Wisconsin 2025 - Homeowner's Guide.
How My Team Can Help
If you're carrying high-interest debt and have equity in your home, it's worth exploring your options. My team and I can:
- Calculate your available home equity
- Review payoff and cash-out options
- Run monthly payment comparisons
- Create a side-by-side savings analysis showing short- and long-term impact
Our goal is simple: help you save money every month and make your equity work harder for you - without overextending your finances.
Let's See What You Could Save
Whether your goal is to consolidate debt, lower payments, or get ahead financially, we can walk through the numbers and see what makes sense for your situation.
Adam Zeman - Mortgage Loan Originator (NMLS #870441)
Union Home Mortgage
414-975-2654 | azeman@uhm.com | www.mkemortgage.com
Apply Online with Adam Zeman