Refinancing Revolving Debt with a Home Equity Loan

Written By Mary Beth Eastman
Last updated November 22, 2019

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April 29, 2019

Simple. Thrifty. Living.

Today, millions of Americans have a great load of revolving debt, including credit card debt and debt from home equity lines of credit (HELOCs). The Federal Reserve reports that the current outstanding consumer revolving debt in the United States is $1.06 trillion, as of February 2019. Having large amounts of revolving debt can get overwhelming. But if you have a large amount of revolving debt and you own a home, it may be worth discovering if refinancing it by using a home equity loan is possible. Here’s what you should know:

If you want to refinance your revolving debt, you do have the option to get a home equity loan to help you manage your debt. With a home equity loan, you can borrow as much as 85 percent of the equity of your home. The equity of your home will equal the market value of your home less the amount you still owe for your mortgage.

The process to refinance revolving debt with a home equity loan involves applying at your local bank or lender. You’ll need information about your property and proof of your identity and income, such as your tax returns, pay stubs, and state ID. Before you apply, consider shopping around and compare fees, prices and offers. Borrow what you need and compare the rates to determine if refinancing your revolving debt with a home equity loan will actually save you money. You start researching the best online loan sites to get information on current rates.

It’s important to assess the pros and cons associated with getting a home equity loan when you’re considering it to help refinance revolving debt. With a home equity loan, you get to take advantage of getting a lump sum up front for your expenses, such as paying off a home equity line of credit (HELOC). This makes it simple to pay off or consolidate debt immediately so you can save on interest. You’ll also have one payment versus several payments and can negotiate for a lower interest rate.

However, your lender can foreclose on your home if you fail to pay as agreed. Also, if your credit history is poor, your income or your income is low, you may not even qualify for the home equity loan. You also can expect to pay additional fees to refinance your revolving debt with a home equity loan.

If you want to save on interest on revolving debt or want one convenient monthly payment, refinancing your revolving debt with a home equity loan may be a strategy for achieving your financial goals.

If you have student loans to refinance, check out student loan refinancing companies. We’ve made a list of the best student loan refinancing companies, which is a great resource for starting your path to lowering your debt.

Just consider all the pros and cons, do the math and assess your financial goals to determine if taking out a home equity loan is right for you.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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