Hey there!
With interest rates finally coming down, I've been hearing more and more buzz about HELOCs (Home Equity Lines of Credit). I get it—those rates can look really tempting, especially when you're staring at high-interest credit card debt or trying to consolidate what feels like a million payments into one.
But before you sign on the dotted line, I want to have a real conversation with you about something important.
Here's the thing about HELOCs that keeps me up at night:
When you use a HELOC to pay off credit card debt, car loans, or other bills, you're essentially taking debt that was unsecured and turning it into debt that's backed by your home. In other words, you're putting your house on the line for that shopping spree, medical bill, or car repair that went on the credit card.
That's a BIG deal. And here are three reasons why I typically steer my clients away from this strategy:
1. You're Trading One Problem for Another (But Now Your Home is at Risk)
Credit card debt is terrible—I'm not minimizing that. But if things go sideways and you can't pay it, you're looking at damaged credit and collection calls. With a HELOC? You could lose your home. The stakes just got exponentially higher. Your home should be your safe place, not collateral for past spending decisions.
2. It Doesn't Fix the Root Problem
If overspending, unexpected expenses, or lack of an emergency fund got you into debt in the first place, a HELOC is just a band-aid. I've seen too many people pay off their credit cards with home equity, breathe a sigh of relief, and then... gradually fill those cards right back up again. Now they've got the HELOC payment and credit card debt. We need to address the "why" behind the debt, not just shuffle it around.
3. Variable Rates Can Bite You Later
Most HELOCs come with variable interest rates. Sure, rates might be lower now, but what happens if they climb again? Your payment could increase significantly, and unlike credit card minimums, you can't just pay less when times are tight. You've committed your home equity, and that payment is due regardless of what life throws your way.
So what's the alternative?
I'm all about creating a strategic debt payoff plan that doesn't put your home at risk. We can look at:
- The debt snowball or avalanche method
- Negotiating with creditors
- Building a small emergency fund first so you stop the debt cycle
- Creating a realistic budget that actually works for your life
Sometimes the slower path is the safer path. And when it comes to your home—your family's security—safe is exactly where we want to be.
If you're feeling overwhelmed by debt and wondering what your best next step is, let's talk. I'd love to help you create a plan that pays down debt without gambling with your home.
You've got this—and you don't have to risk everything to prove it.
With you every step of the way,
Jenny
P.S. Have questions about HELOCs or debt payoff strategies? Hit reply—I read every email and I'm here to help! 💙
See you next week!
