HELOC vs. home equity loans: Which is better for paying off expensive debt?

The recent spike in the cost of living has forced many people to resort to credit cards to keep their family budgets from bursting. “The majority of people struggling with credit card debt aren’t doing so because they’re irresponsible,” Austin Kilgore, with the Achieve Center for Consumer Insights, tells the New York Post.“They are struggling to deal with essential expenses.”On the other hand, Cotality, a property information and analytics provider, recently released a report showing that “the average borrower now has about $295,000 in accumulated home equity” at the end of 2025.

Though many Americans are feeling squeezed by a dramatic rise in prices over the last six months, they are sitting on a lot of home equity that can be used to zero out their bad, expensive credit card debt.Credit card debt is expensive relative to other kinds of debt because the average interest rate on a credit card balance has reached an all-time high. According to Lendingtree, the average APR offered with a new credit card is currently 23.79%, up from 23.75% in April. That means if you have $5,000 in debt on a card at that rate, you will owe $98.75 in interest alone every month.Making the minimum payments, it will take you 200 months — almost 17 years — to pay off that debt, assuming you don’t charge anything else to that credit card in the meantime.Credit card debt is also “bad debt” because what you buy with it usually doesn’t appreciate in value (for example, a dinner out).Good debt, on the other hand, leaves you with a valuable and hopefully appreciating asset.

For example, your mortgage is debt that you take on to acquire an asset that has historically gained value: your house.Turning bad debt into good debt can be a strategic financial move that involves leveraging your home’s equity to consolidate high-interest, unsecured credit card debt into a lower-interest, secured loan. Because credit card interest rates are often double or triple the rates...