How Much Can You Save by Consolidating Credit Card Debt with Home Equity?

Consolidating $20,000 in credit card debt at 21% APR into a home equity loan at 8.5% APR saves approximately $2,500 per year in interest, or about $12,500 over a 5-year payoff period. Your actual savings depend on your credit card rates, your home equity rate, the loan term, and closing costs. The larger the gap between your current rates and your home equity rate, the more you save.

The Math Explained

Interest is simply the rate multiplied by the balance. When you move a balance from a higher rate to a lower rate, you pay less interest on that same balance. The savings come from the rate difference, not from reducing the amount you owe.

According to Federal Reserve data, the average credit card interest rate was approximately 21% in late 2024. Home equity loan rates typically run several percentage points lower. That gap is where the savings come from.

Worked Example: $20,000 in Credit Card Debt

Imagine you carry $20,000 in credit card debt at an average APR of 21%. Here is how the interest costs compare across different consolidation options:

Without consolidation (credit cards at 21%):

• Annual interest: $20,000 x 21% = $4,200
• Over 5 years: approximately $21,000 in interest (if making minimum payments)

With a home equity loan at 8.5%:

• Annual interest: $20,000 x 8.5% = $1,700
• Over 5 years: approximately $4,250 in interest
• Annual savings: approximately $2,500
• 5-year savings: approximately $12,750

With a cash-out refinance at 6.5%:

• Annual interest: $20,000 x 6.5% = $1,300
• Over 5 years: approximately $3,250 in interest
• Annual savings: approximately $2,900
• 5-year savings: approximately $14,750

These are simplified calculations. Real savings depend on whether you make fixed payments (which pay down principal faster) or minimum payments (which extend the timeline). Use the debt consolidation calculator at /calculators to model your exact scenario.

Worked Example: $35,000 Across Multiple Cards

Now consider $35,000 spread across three cards at different rates:

• Card A: $15,000 at 24%
• Card B: $12,000 at 19%
• Card C: $8,000 at 22%

Average weighted rate: ($15,000 x 24% + $12,000 x 19% + $8,000 x 22%) / $35,000 = 21.7%

Without consolidation:

• Annual interest: $35,000 x 21.7% = $7,595

With a home equity loan at 8.5%:

• Annual interest: $35,000 x 8.5% = $2,975
• Annual savings: approximately $4,620

Consolidating this debt saves nearly $4,600 per year in interest alone. Over a 5-year payoff period, that is approximately $23,000 in interest savings.

Factor In Closing Costs

Home equity products are not free. Closing costs typically range from 2 to 5 percent of the loan amount. On a $30,000 home equity loan, expect $600 to $1,500 in closing costs. On a cash-out refinance, costs are higher because you are refinancing the entire mortgage.

To calculate your net savings:

1. Calculate annual interest savings (old rate minus new rate, times balance).
2. Subtract annual closing cost amortization (total closing costs divided by years you expect to keep the loan).
3. The result is your net annual savings.

If your closing costs are $1,500 and your annual interest savings are $3,000, your net savings start in year one and compound over time.

When the Savings Disappear

The math works until behavior undoes it. According to CFPB research, a significant percentage of borrowers who consolidate credit card debt into home equity products re-accumulate card balances within two years. When that happens:

• You still owe the home equity loan.
• You owe new credit card debt on top of it.
• Your total debt is higher than when you started.

To prevent this: close or freeze the paid-off credit cards, build a budget, and treat the home equity loan as a payoff vehicle, not a spending account.

How to Calculate Your Own Savings

1. List every credit card balance and its APR.
2. Calculate your weighted average rate: (balance x rate for each card) / total balance.
3. Get a quote for a home equity loan, HELOC, or cash-out refinance at /home-equity-debt-consolidation.
4. Multiply your total balance by each rate to compare annual interest.
5. Subtract estimated closing costs from first-year savings to see net savings.
6. Use the debt consolidation calculator at /calculators to model monthly payments and total cost over the full payoff period.

The Bottom Line

The interest savings from consolidating credit card debt with home equity are real and often substantial. For most homeowners with significant credit card debt, the annual savings run into the thousands of dollars. The key is to account for closing costs, model the full payoff timeline, and, most importantly, prevent re-accumulation of the original debt.