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Borrowing from your home’s accumulated equity comes with inherent risks. Since your home serves as collateral, you could risk losing it should you fail to repay all that’s been withdrawn. If you can comfortably afford your payments, however, borrowing with a home equity loan or home equity line of credit (HELOC) can be particularly advantageous, especially in today’s cooler rate climate. And if you use it for eligible home projects, you may even be able to deduct the interest paid on the products when you file your next tax return.
But home projects and repairs are only one of the optimal ways to use your home equity. One of the timelier ways to use a home equity loan or HELOC in 2025 is to tackle your existing credit card debt, particularly if you’re burned by high-interest credit card debt. Below, we’ll explain why.
See how much home equity you’d be eligible to borrow here now.
Why you should use home equity to pay credit card debt in 2025
Not sure if it’s worth borrowing from your home to pay down your debt? Here are three reasons why it could be a smart move to make this year:
Rates are significantly lower
Arguably the top reason for using your home equity to pay your debt can be seen in the difference in interest rates. Credit card rates are hovering around a record 23% right now while home equity loan and HELOC interest rates are around 8%, making the latter type nearly three times cheaper than credit cards. It makes sense, then, to use the latter to pay down the former. If you do so, however, it’s critical that you refrain from adding to your existing credit card debt or you’ll risk putting yourself into an endless debt cycle. If you can hold off on swiping your cards, though, using a lower-rate home equity loan can be beneficial now, in 2025.
See what home equity loan interest rate you could qualify for here.
Home equity loan rates are fixed
Credit card interest rates, while significantly higher than home equity loan rates, are also variable and subject to change. That means that your debt could become even more expensive than it already is if economic factors don’t break in a positive way. Compare this to the low, fixed home equity loan rates lenders are offering currently and it becomes clear which option is preferable in today’s economic climate. And if rates were to drop even further, home equity loans could be refinanced to take advantage.
Credit card debt relief appears delayed
Even if inflation cools again (it rose in the last three months) and interest rate cuts are issued again (they seem to be on pause), credit card rates will only fall marginally. That’s because credit card rates are driven by a complex, interwoven series of factors of which inflation and Federal Reserve activity are only two. This is why, for example, home equity loan rates fell consistently for much of 2024 while credit card interest rates rose to a record high last October. Understanding this dynamic, then, and the likelihood of delayed credit card debt relief, homeowners may be better served by using a low-rate home equity loan to pay off their high-rate credit card debt now, before it potentially becomes even more burdensome this year.
The bottom line
If you’re stuck with high-rate credit card debt but can secure a low-rate home equity loan now, it may make sense to use the latter to pay off the former in 2025. With interest rates almost three times lower than credit cards, a fixed rate that will remain low versus a variable one that could change and the likelihood of delayed credit card debt relief, a home equity loan could be advantageous for many owners now. Just be sure to calculate your monthly payments in advance to guarantee that you can make them with ease.
Start calculating your potential home equity loan payments here now.