The Best Way to Consolidate Debt: Comparing HELOCs, Home Equity Loans, and More

Struggling with high-interest credit card balances or juggling multiple monthly payments? Consolidating your debt with a home equity loan or HELOC could help you save money, simplify repayment, and reduce financial stress.

This guide breaks down the pros and cons of using your home equity to pay off debt, including how HELOCs and home equity loans compare – and which might be better for your situation.

At a Glance: Which Loan for Which Debt Scenario?

HELOC: A Flexible Solution for Rolling Debt

Best for: Managing different debts over time, especially if you’re still tackling new balances.

A Home Equity Line of Credit (HELOC) offers a revolving credit line you can draw from as needed. This makes it useful if you're consolidating debt in phases or expect to pay off and reuse the funds.

Benefits:

• Only pay interest on the amount you use

• Reusable credit line during draw period

• Potentially lower interest rates than credit cards

Considerations:

• Variable interest rate means your monthly payment could rise

• Requires strong financial discipline to avoid re-accumulating debt

• Larger debt amounts may increase repayment costs later

Tip: HELOCs can help streamline and reduce your interest on multiple debts, but they work best if you're committed to avoiding new high-interest debt going forward.

Home Equity Loan: One-and-Done Debt Payoff

Best for: Paying off a specific, fixed amount of debt all at once.

A home equity loan offers a lump sum at a fixed rate, making it easy to pay off all your high-interest debts in one move and lock in a predictable monthly payment.

Benefits:

• Fixed interest rate means steady, reliable payments

• Easier to budget and plan your payoff timeline

• Usually lower interest than credit cards or personal loans

Considerations:

• You’ll pay interest on the full loan amount

• Requires a good amount of home equity and solid credit

• Risk: you’re turning unsecured debt (like credit cards) into secured debt backed by your home

Tip: This option is ideal if you know exactly how much you need to consolidate and want to pay it off with structure and stability.

Equity Sharing Home Loans: Preserve Cash Flow

Best for: Homeowners with equity, but tight budgets – especially if monthly payment relief is the goal.

With an equity sharing home loan, you receive a lump sum with lower monthly payments (interest-only), in exchange for sharing a portion of your home’s future appreciation.

Benefits:

• Lower monthly payments than a traditional loan

• Doesn’t replace your first mortgage

• Can free up monthly cash to focus on becoming debt-free

Considerations:

• You’ll owe a share of future home appreciation when you sell or refinance

• Long-term cost can exceed traditional interest if your home appreciates significantly

• May not be right if you plan to keep your home for decades

Tip: Consider equity sharing if you’ve built up significant equity, and want room to breathe while tackling other debts.

Personal Loans or Balance Transfers: For Smaller Debt Loads

Best for: Fast payoff of moderate debt without using your home as collateral.

If your total debt is manageable and you have good credit, a personal loan or balance transfer card could help you lock in lower interest without touching your home equity.

Benefits:

• No collateral required

• Quick approval and funding

• Ideal for $5,000–$20,000 debt consolidation

Considerations:

• Typically higher rates than secured loans

• Shorter terms mean higher monthly payments

• Risk of reaccumulating debt if spending isn’t under control

Tip: Personal loans are best for smaller consolidation goals. Just make sure you aren’t solving debt with more debt.

Choose the Right Tool for Your Financial Goals

When it comes to debt consolidation, the right choice depends on your total debt, equity, credit score, and how much structure or flexibility you need.

• Want structure and predictability? Consider a home equity loan.

• Prefer flexibility or ongoing access? A HELOC may work better.

• Need to reduce monthly payments? Look at equity-sharing.

• Handling a smaller balance? Personal loans or balance transfers can work.

No matter which path you choose, the most important step is committing to long-term financial health – not just short-term relief.

At Unison, we’re here to help you explore all your options. Whether you're looking to consolidate debt, renovate your space, or access your equity for another life goal, we offer innovative solutions that fit real-life needs. We also offer HELOC/HELOAN products that can help you access up to 90% of your equity, with no usage restrictions and no prepayment penalties. Ready to start fresh?

Disclaimer: This content is for informational and educational purposes only and does not constitute financial, legal, or lending advice. Loan terms and availability vary by lender and state. Consult a qualified financial professional or lender for personalized guidance tailored to your situation. Unison HELOC and Unison HELOAN are powered by SpringEQ and are not underwritten by Unison Mortgage Corp.