Home equity loan vs. HELOC for paying off debt

Updated November 8, 2026

Both let you borrow against your home without replacing your mortgage. They're often the better choice when your first mortgage has a low rate you want to keep.

The two side by side

	Home equity loan	HELOC
How you get the money	One lump sum	A credit line you draw on as needed
Rate	Usually fixed	Usually variable, tied to the prime rate
Payments	Fixed, principal and interest	Often interest-only while you draw, then principal and interest
Typical term	5 to 30 years	About 10 years to draw, then 10 to 20 to repay
Best for	Paying off a set amount of debt once	Costs that come in stages

How much you can borrow

Lenders look at your combined loan-to-value: your mortgage plus the new loan, divided by the home's value. Many cap it at 80% to 85%, and some go to 90% for strong borrowers. With a $400,000 home and $220,000 owed, an 85% limit allows about $120,000.

Costs to check

Closing costs are usually lower than for a refinance, and some HELOCs have none. Read the fine print for annual fees, minimum draws or an early-closure fee.
HELOC rates move. If the prime rate rises, so does your payment. Check the payment at a rate a few points higher.
The payment jump. When a HELOC's draw period ends, payments can rise sharply as principal comes due. Plan for that date from the start.
Taxes: as with a cash-out refinance, interest is generally not deductible when the money pays off other debts.

For paying off debt

A home equity loan suits most debt payoffs. You know the amount, the rate is fixed, and the debt is gone by a set date. A HELOC only works for this if you treat it the same way: draw once and pay it down on a schedule.

Like any loan against your home, missed payments can lead to foreclosure. Our HELOC calculator compares paying your debts as they are with rolling them into a home equity line.

Have questions? Talk it through

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