# Using a HELOC to Pay Off Debt: What Homeowners Should Know
A home equity line of credit, or HELOC, lets homeowners borrow against the equity they've built in their property. For those carrying credit card balances at 18% to 24% interest rates, a HELOC offering rates around 8% to 10% can appear attractive.
Here's how it works. You tap into your home's value minus what you owe on your mortgage. A lender approves a credit line, and you draw funds as needed, paying interest only on what you use. Many HELOCs come with variable rates tied to prime lending rates, meaning your payment changes as interest rates shift.
The math seems simple. Trade a $15,000 credit card debt at 22% for a HELOC at 9%. Over five years, you'd save thousands in interest. Your monthly payment drops from roughly $360 to $280. This appeals to homeowners drowning in revolving debt.
But HELOCs carry real risks ordinary personal loans don't.
Your home secures the debt. If you fall behind on payments, the lender can foreclose. You lose your house. Credit card debt, by contrast, doesn't threaten your primary residence, though it damages your credit score and triggers collection calls.
Variable rates add another layer of risk. If prime rates climb to 10% or 11%, your HELOC rate climbs with it. Your affordable $280 monthly payment becomes $320 or $360. Borrowers on tight budgets face payment shock.
HELOCs also tempt spending. Once you've paid off that credit card with HELOC funds, the card balance hits zero. Discipline falters. You max out the card again while still owing the HELOC. Now you're deeper in