If you have a large outstanding debt on one or more credit cards, you may be struggling to bring that debt down. It can take years of making the minimum payment to actually zero out the balance, because interest accounts for such a large portion--as much as half--of each payment issued. Also, since most credit cards have variable interest rates, minimum payment amounts frequently increase, as rates climb higher.

The process of paying off credit card debt becomes even more complicated when multiple credit cards are involved. Varying monthly payment due dates, coupled with different minimum amounts owed can make the credit card game a thorny situation, indeed. But fortunately, if you own your own home, and you have some solid equity built up in it, you can apply for a home-equity loan, which you can in turn use to pay off your credit card debts.

Key Takeaways

  • Those with massive credit card debts may struggle to bring down their balance, despite religiously making minimum monthly payments. 
  • Individuals with equity built up in their homes may wish to consider apply for a home-equity loan, which may be used to pay off credit card debt.
  • Home equity loans offer the advantage of low interested rates, that are often modestly higher than primary mortgage rates.
  • Taking out a home equity loan may be too risky a prospect for some people, who fear losing their homes, in the event that they default on the loan.

There are a few important characteristics to home-equity loans that one must consider, when contemplating this strategy of paying off credit card debt. The most important aspect is the risk you one takes on when securing the loan with their home as collateral. In the event a borrower is unable to repay the loan, there's the very real and terrifying possibility that his house may be seized and sold by the lender, to collect on the funds he's owed.

For many families, the prospect of losing their home may be too off-putting. While credit scores are repairable, uprooting your family due to a foreclosure on your home can be an unimaginable, permanently scarring event. Moreover, a home-equity loan can also and up being vastly more expensive than a similar debt consolidation loan, because it requires a home appraisal, along with other fees typically associated with primary mortgage transactions. (For more considerations, see "Home-Equity Loans: The Costs.")

On the other hand, one of the great advantages to using a home-equity loan to pay off credit card debt is the low interest rate afforded to these secured loans. Most home-equity loan rates are just a step higher than primary mortgage rates, and they are usually much lower than average credit card interest rates. Therefore, using a home-equity loan can help you pay off your credit card debt much sooner, since less money funnels towards drawing down accrued interest. Furthermore, the interest charged on a home-equity loan is also tax-deductible, for those who itemize deductions on their tax returns. Due to the combination of interest and tax savings advantages, many believe that the home equity loan option reigns supreme over other debt-management strategies.

[Important: A home equity loan is typically referred to as a "HELOC", which stands for Home Equity Line of Credit.]