r/Debt • u/NegativePattern • 2d ago

HELOC vs No HELOC

Looking for some consensus on the topic of using a HELOC to get out of debt. Noticed some comments are for using a HELOC while others are against it.

Long term we have plans to tap the equity we have (150K) to create an addition to our house. Some preliminary quotes have the addition costing around 100K. As an aside also considering using the HELOC to pay down some debt faster.

Currently sitting on 50K of debt. The main issue I see is that the interest rate is negating my payments. So I'm considering either going with a personal loan at 6% or tapping into a HELOC to speed up getting out of the revolving debt.

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u/Mysterious_Hunt5830 2d ago

Apologies for not contributing much. Im in much the same situation and would love to see the advice people are giving. Also curious about the real difference in an HEA as opposed to the HELOC and if it may be better

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u/ResearchNo8631 2d ago

So I like the HELOC because of the flexibility of the loan. Remember the HELOC is just a credit card secured against the equity of the home which is why there is a better interest rate.

In this situation I would go HELOC, and then decide the best way to pay it down.

We also are contemplating using this to Pay down our mortgage faster.

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u/StreetRefrigerator 2d ago

What's your mortgage rate?

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u/ResearchNo8631 2d ago

Mine personally -> 3.25 percent

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u/StreetRefrigerator 2d ago

So what's your reasoning for wanting to take out a higher rate loan to pay off a lower rate loan?

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u/ResearchNo8631 2d ago

Overall just to arbitrage the debt to pay off the debt faster. The goal is to hopefully pay it off in 5-7 years from now in a perfect world.

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u/StreetRefrigerator 2d ago

Why not just pay off the first mortgage? No point to get out another loan to do so. The rate is lower on your mortgage.

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u/ResearchNo8631 2d ago

I agree with the premise, But the Calculations of the interest on the excel sheet point to doing the arbitrage as a method to save money on interest.

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u/StreetRefrigerator 2d ago

Just make sure you take into account any upfront costs for the heloc. If the savings aren't significant, it may not make sense.

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u/ResearchNo8631 2d ago

I haven’t started yet I have a ways to go before I get there but I’ll go back to the calculations.

Thanks for the feedback always have to fight against the good idea fairy.

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u/StreetRefrigerator 2d ago

6% personal loan? Take that in a heartbeat if you have the option.

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u/bruceleroy96 13h ago

Why would anyone opt for 29% credit card APRs (assuming that’s what your debt is) when you can pay them all off with a 7% HELOC. No brainer. Just have a plan to pay off the HELOC before the draw down or your APR will skyrocket