4 Benefits of Using a Home Equity Credit Line to Consolidate Debt

Most types of consumer debt balances grew in 2023, according to data from Experian, with the average total debt balance increasing by 2.3% to $104,215.

Credit card balances may be particularly difficult to pay down because of the variability of the annual percentage rate (APR). Credit cards account for $6,501 of consumers’ average debt, and the average consumer owns around four credit cards.

One option to help consolidate debt and potentially pay it off more quickly is a home equity credit line — also known as a home equity line of credit, or HELOC — that allows homeowners to borrow based on their home equity through a revolving line of credit.

If you are looking for ways to consolidate your debt, consider the following 4 benefits of using a home equity credit line.

Home Equity Credit Line Debt Consolidation Benefit #1: Lower Interest Rates

One good reason to consider a home equity credit line is that they typically carry lower interest rates than credit cards or personal loans. The interest rate on a home equity credit line is often tied to the prime rate and is usually variable, although lenders may offer a fixed rate as part of a promotion. Nonetheless, it will typically be a better interest rate than a credit card.

Home Equity Credit Line Debt Consolidation Benefit #2: Simple Interest

Home equity credit lines use simple interest rather than compound interest — meaning you only pay interest on the original borrowed amount, unlike a typical credit card.

Home Equity Credit Line Debt Consolidation Benefit #3: Longer Repayment Period

Another benefit is the longer repayment period associated with a home equity credit line. This means the monthly payments will be smaller than with a short-term loan.

Home Equity Credit Line Debt Consolidation Benefit #4: Increased Financial Flexibility

The flexibility of a home equity credit line can also be a financial benefit for people looking to consolidate debt. A home equity credit line can be used for essentially whatever you need during your draw period.

While you may use it to mostly consolidate debt, it can also be used to cover any unforeseen bills or payments throughout the life of the credit line. That means any additional debt you accrue will be consolidated with the same lender at the same low interest rate.

A Zions Bank Home Equity Credit Line can help you pay off your debt as you  navigate the current economic environment. Apply for a Home Equity Credit Line online or visit with a banker at a Zions Bank branch near you. We offer local decision making so you can enjoy a faster turn-around time on your application.

Article originally published on April 18, 2023, and refreshed on February 5, 2024.

1. Loans subject to credit approval. Terms and conditions apply. See a banker for details.