Should you use a home equity loan to pay off your debts?

Rolling credit card debt into a home equity loan trades unsecured debt for secured debt — miss payments and you risk foreclosure, not just a credit-score hit. In exchange, you typically get a lower rate and a longer term than the debt you're paying off.

Advantages of using home equity loans or HELOCs to pay off debts include fewer bills to track and lower monthly payments compared to credit card minimums.

Get quotes from at least three lenders and have a repayment plan before you consolidate this way — Bankrate's research shows most borrowers who skip that step overpay.

Moving credit card debt into a home equity loan changes what kind of debt it is. Credit card debt is unsecured: miss payments and the issuer can sue you or send you to collections, but it can't take your house. A home equity loan or HELOC is secured by your home, so missed payments can lead to foreclosure. That's the trade you're making, and it only pays off under specific conditions.

The upside of converting your higher-interest debt into a home equity loan? Home equity rates average under 8%, whereas many credit cards are close to 20%. That gap can be real money back in your pocket — but only if you qualify for a rate near the average, you've already fixed whatever caused the balances, and you understand what's now on the line if you fall behind.

Is using a home equity loan to pay off debt right for you?

A home equity loan or HELOC is likely a fit if you have a credit score of 700 or higher, a debt-to-income ratio — all monthly debt payments divided by gross monthly income — of 43% or less after adding the new payment, at least 15% to 20% equity left in your home once you borrow, and you've already changed the spending habit that created the balances.

But if your credit is weak or you carry large card balances, you probably won't qualify for the lowest rates, making the move less worthwhile. And if you're not confident you can avoid running your credit cards back up, a home equity loan could leave you juggling two payments instead of one.

In deciding whether it's best to tap into your home's equity to pay off other debts, keep in mind you could be at risk of foreclosure if you find yourself unable to make the loan payments on time.

Learn more: Bankrate's home equity loan calculator

How much can you save by consolidating with home equity?

Here's what $15,000 in credit card debt actually costs under two paths: rolling it into a 15-year home equity loan at 8% (close to today's average rate), or paying only the card's minimum each month at 20%.