--- title: How To Use Home Equity to Pay Down Debt description: Using home equity to pay down debt is a great solution and should save you money in the long run. Here are some benefits to using home equity to pay down debt. image: https://rmcu.net/hubfs/Campaigns/Primary%20Checking/Blog%20Images/home-equity-pay-down-debt.jpg --- [![RMCULogoColor.jpg](https://rmcu.net/hubfs/RMCU-logo.svg "RMCULogoColor.jpg")](https://rmcu.net) [Online Banking Login](https://banking.rmcu.net/auth/signin) [Online Banking Login](https://banking.rmcu.net/auth/signin) [![RMCULogoColor.jpg](https://rmcu.net/hubfs/RMCU-logo.svg "RMCULogoColor.jpg")](https://rmcu.net) - - [Home Loans](https://rmcu.net/home-loans) - [Personal](https://rmcu.net/personal) - [Business](https://rmcu.net/business) - [Membership](https://rmcu.net/membership) - [Careers](https://rmcu.net/membership/about-rmcu/careers) - [Contact Us](https://rmcu.net/contact-us) - Search - [Financial Education ▾](https://rmcu.net/blog/how-to-use-home-equity-to-pay-down-debt#financial-education-nav) - [About RMCU ▾](https://rmcu.net/blog/how-to-use-home-equity-to-pay-down-debt#about-rmcu-nav) - [Security](https://rmcu.net/membership/security) - [TruStage: Security Alert](https://rmcu.net/trustage-security-alert) - [Money Mastermind](https://rmcu.net/money-mastermind-lessons) - [Financial Counseling](https://rmcu.net/financial-counseling) - [Savvy Money](https://rmcu.net/membership/financial-education/savvy-money) - [Blog](https://rmcu.net/blog) - [Resources](https://rmcu.net/resources) - [RMCU Team](https://rmcu.net/membership/about-rmcu/rmcu-team) - [Member Information](https://rmcu.net/membership/about-rmcu/member-information) - [Annual Meeting](https://rmcu.net/membership/about-rmcu/annual-meeting) - [Community](https://rmcu.net/membership/about-rmcu/community) - [Our History](https://rmcu.net/membership/about-rmcu/history) [back to blog](https://rmcu.net/blog) [Home and Mortgage](https://rmcu.net/blog/topic/home-and-mortgage) # How To Use Home Equity to Pay Down Debt Read Time **2 mins** | Written by: Kelly Fleiner [mailto:?subject=How%20To%20Use%20Home%20Equity%20to%20Pay%20Down%20Debt&body=https%3A%2F%2Frmcu.net%2Fblog%2Fhow-to-use-home-equity-to-pay-down-debt](mailto:?subject=How%20To%20Use%20Home%20Equity%20to%20Pay%20Down%20Debt&body=https%3A%2F%2Frmcu.net%2Fblog%2Fhow-to-use-home-equity-to-pay-down-debt) ## Lower Interest Potentially the most important reason to use a home equity loan for paying down debt is that it typically offers a lower interest rate than other loans. Look at credit card rates, for example; they generally run between ten and twenty percent. This is a pretty high rate, especially if you keep a high balance and pay it down over time. The reason for these higher rates is primarily the fact that these are unsecured lines of credit. An unsecured line of credit is one in which the loan is not backed up by any collateral. Since there’s no guarantee for the credit card companies, have to charge a higher rate. Compare this to a home equity loan. You’re putting your home up as a safety net; if you fail to pay back the loan the bank still gets something of value. That means there’s less risk for the lender. When there’s less risk for the lender, the interest rate goes down. The rate for home equity loans has typically been less than five percent, making it an ideal way of paying down debt and consolidating your payments.  ## Potential Tax Deduction Another reason to use home equity for paying down debt is the potential for a tax deduction on the interest. If you itemize your tax deductions each year, the interest on a home equity loan is just like the interest on your mortgage payments. This makes it deductible up to $100,000. If you’re paying off debt, that means that on top of consolidating your debt and making it easier to manage you’ll potentially be saving money on taxes as well. Talk to your accountant or your financial institution to find out how this tax deduction could benefit your family. ## Cash Payment Consolidating and paying off debt is nice, but there’s one really great thing about home equity loans that makes them ideal in some situations. A home equity loan gives you more than just a new line of credit; it gives you cash. Cash, as is well known, provides greater flexibility when you go to use it. Rather than paying off your bills for you, you’re given a lump sum to use how you see fit. That means that if you have debts in different locations, like credit card debt, medical bills, or other forms of debt, you can be in control. The money can be divided up in any way you see fit, and you’ll end up with all of your debt in one place, with one interest rate.  ## Infinite Uses After you’ve consolidated your debts, you can use the remainder of your home equity loan for other projects. Commonly this type of loan is used for home repairs or renovation, but you could use it to finally take a vacation or to upgrade your home office. It should be noted that this is a loan, and shouldn’t be used frivolously. Make sure you use it wisely and consult your financial institution for advice. What could be better than paying off debt with a little leftover to update your kitchen or a new man cave? Home equity loans can be a great solution if you find yourself with debt beginning to spiral out of control. It’s a great way to simplify your payments and end up paying less. You could even end up with a tax break and a little left over for your dream projects. Just make sure to be careful and remember that home equity loans have your home as collateral, so it’s important to take them seriously. If you listen to the advice of your financial institution and use your loan responsibly, paying off debt will be no problem.        [mailto:kfleiner@rmcu.net](mailto:kfleiner@rmcu.net) ##### Kelly Fleiner Kelly Fleiner, CUBDP is the Vice President of Brand and Community Engagement at Rocky Mountain Credit Union, where she leads marketing, public relations, and community impact initiatives rooted in Montana values. A strategic storyteller and culture champion, Kelly blends data-driven insight with people-first leadership to strengthen brands, empower teams, and deepen community connections. She is passionate about elevating the credit union movement through bold ideas, meaningful partnerships, and authentic engagement. Share the Love [mailto:?subject=How%20To%20Use%20Home%20Equity%20to%20Pay%20Down%20Debt&body=https%3A%2F%2Frmcu.net%2Fblog%2Fhow-to-use-home-equity-to-pay-down-debt](mailto:?subject=How%20To%20Use%20Home%20Equity%20to%20Pay%20Down%20Debt&body=https%3A%2F%2Frmcu.net%2Fblog%2Fhow-to-use-home-equity-to-pay-down-debt) You May Like These ## Related Articles ![](https://rmcu.net/hs-fs/hubfs/Campaigns/Primary%20Checking/Blog%20Images/hot-to-use-a-credit-union-to-pay-off-debt.jpg?width=700&name=hot-to-use-a-credit-union-to-pay-off-debt.jpg) Tips from the Pros ### [How to Use a Credit Union to Pay Off Debt](https://rmcu.net/blog/how-to-use-a-credit-union-to-pay-off-debt) Using a credit union for your banking can help you pay off debt by taking advantage of various finan... Keep Reading ![](https://rmcu.net/hs-fs/hubfs/car-loan.jpg?width=700&name=car-loan.jpg) Loans ### [How Much Money Should You Put Down on a New Car?](https://rmcu.net/blog/how-much-money-should-you-put-down-on-a-new-car) You are finally ready to buy a new car. You have searched and researched, and saved some money for a... Keep Reading ![](https://rmcu.net/hs-fs/hubfs/2022%20RMCU%20Banner%20Images/RMCU_HELOC_Blog1.jpg?width=700&name=RMCU_HELOC_Blog1.jpg) Home and Mortgage ### [What is a Home Equity Loan?](https://rmcu.net/blog/what-is-a-home-equity-loan) What is a home equity loan, how does it differ from a Home Equity Line of Credit (HELOC), and what c... 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