According to a Forbes article from April of 2025, the average American has $6455 in credit card debt. It’s expensive, stressful, and most of the time, people are just treading water with minimum payments that barely touch the principal. If you own your home and you’ve lived in it for a year or more, you might have a powerful tool at your disposal to wipe the slate clean.
You may have heard of a cash-out refinance, HELOC, or HELOAN but what do these various options mean? What are the benefits and what are the drawbacks? Let’s talk through it without the jargon, without the sales pitch, and with a focus on what’s actually best for you.
What is Home Equity and How to Use It
If you’ve got equity in your home (meaning you owe less than it’s worth), you may be able to use that value to pay off high-interest debt like credit cards or personal loans at a significantly lower interest rate.
But there are various ways to do this, and not all home equity options are created equal. Each one has trade-offs, and choosing the wrong one could actually cost you more in the long run.
Option 1: Cash-Out Refinance
This one replaces your current mortgage with a new, bigger one and you get the difference in cash.
Pros:
- One mortgage payment instead of juggling multiple debts
- Lower interest rates than credit cards
- Lock in a fixed rate for the life of the loan
Cons:
- Resets your mortgage term
- Closing costs can be thousands
- If you already have a low mortgage rate, this might increase your overall cost
Option 2: HELOC (Home Equity Line of Credit)
A HELOC is a revolving line of credit—like a credit card backed by your home.
Pros:
- Flexible access to funds as needed
- Interest-only payments during the draw period
- Only pay interest on what you actually borrow
Cons:
- Variable interest rates can go up
- Payments may increase sharply after the draw period
- Easy to over-borrow if you’re not careful
Option 3: HELOAN (Home Equity Loan)
A HELOAN is a lump-sum second mortgage with a fixed interest rate and term.
Pros:
- Keep your existing low-rate mortgage intact
- Fixed monthly payments and rate
- Great for one-time needs like debt consolidation
Cons:
- Adds a second mortgage payment to your budget
- No flexibility to borrow more later
So, What Should You Do?
While every situation is unique and we always suggest booking a free consultation with a Loan Officer, in general, here’s a quick breakdown:
You purchased your home recently and your rate may already be higher = Cash-Out Refi
Need flexibility over time = HELOC
Want a lump sum, fixed rate = HELOAN
If you’re still not sure, that is completely normal. These decisions are a mix of math and your individual goals and the right move depends on your full financial picture, not just your credit score or home value.
A Quick Note for LGBTQ+ Homeowners
There are real reasons our community is sometimes hesitant to take financial steps like this. Maybe you’ve been burned by bad advice. Maybe you’ve been made to feel like your identity is a liability. Maybe it’s just hard to know who to trust.
At Pride Lending, we don’t play those games. We don’t shame, we don’t judge, and we don’t talk down to you. We walk you through the numbers and the options and then we let you decide what feels right.
You deserve to feel safe, seen, and supported when making big financial moves. That’s the bare minimum.
Let’s Talk About What’s Possible
Using your home equity to pay off debt isn’t about getting flashy. It’s about getting free from stress, from 28% credit card interest, and from that pit in your stomach every time you check your statements.
Real-World Example: Meet Alex & Jordan
Alex and Jordan are a couple who bought their first home a few years ago. They’ve been doing everything “right” working full time, building their savings but after some unexpected medical bills and a couple of high-interest credit cards they used to furnish their home, they found themselves $42,000 in debt.
Their minimum payments barely made a dent, and they were shelling out over $1,200 a month just in credit card payments with most of it going toward interest.
After a quick equity review, we realized they could do a cash-out refinance that:
- Paid off all their high-interest debt
- Rolled everything into one new mortgage payment
- Actually reduced their total monthly outflow by about $700
Now? One payment, lower stress, and they’re finally able to breathe again.
Let’s Connect
Want to run the numbers? Want a second opinion? Want a Loan Officer who talks like a human and actually listens?
Let’s connect. This might be the smartest financial move you make this year.
I am at your service,
Andrew Dort
Broker Owner, Pride Lending LLC
Whether you’re buying your first home or just wondering where to start, we’re here to guide you—no pressure, no judgment. Book a free consultation with Pride Lending today and let’s talk about what’s possible.
