Using a HELOC for Debt Consolidation: Brilliant or Dangerous?

The Math is Undeniable

Let's look at the numbers. You have $30,000 in credit card debt at 24% APR. Your minimum payment is $900/month, and $600 of that is just interest.

Option A: Keep Paying Minimums.
It will take you 28 years to pay off. You will pay $55,000 in interest.

Option B: HELOC Consolidation.
You move the $30,000 to a HELOC at 9%. Your interest-only payment drops to $225/month.
If you keep paying $900/month, you will be debt-free in 3.5 years. You save $45,000.

The Psychological Trap

The math works, but human behavior often fails.
The Risk: 70% of people who consolidate debt run their credit cards back up within 2 years. Now they have a $30,000 HELOC AND $30,000 in new credit card debt. And because the HELOC is secured by their home, they are now at risk of foreclosure.

The Correct Strategy

1. Get the HELOC. Pay off the cards to $0.
2. Perform Plastic Surgery. Physically cut up the credit cards (or lock them in a safe). Remove them from Apple Pay/Amazon.
3. Auto-Pay the Savings. Take the difference in monthly payment (e.g., $675) and automate it to pay down the HELOC principal every month.

If you don't change your spending habits, a HELOC won't save you; it will just delay the inevitable bankruptcy.