Weighing Home-Equity Loans Against High-Interest Debt: Benefits and Risks

Rising credit-card interest rates, now averaging close to 22%, are straining many borrowers who struggle with high monthly payments. Homeowners who have built equity during years of rising property values can tap that equity through a home-equity loan or HELOC, which generally carry rates around 7% and may simplify repayment into a single monthly obligation. The lower rate can reduce overall interest costs and help disciplined borrowers pay down principal faster.

Yet, the trade-off is significant: the debt becomes secured by the home, exposing borrowers to foreclosure risk if they default. Additionally, many HELOCs have variable rates that could increase as broader interest rates climb, adding payment uncertainty. Ultimately, the strategy works only for those with stable income, a clear repayment plan, and the ability to avoid further high-cost borrowing.