Making six figures but still carrying credit card debt at 20-30% interest rates while sitting on substantial home equity? This guide is for you.
I’ll walk you through exactly how to use a HELOC (Home Equity Line of Credit) to eliminate that high-interest debt and accelerate your path to financial freedom.
If you prefer video, watch this for the basics of HELOCs, including credit score requirements, variable vs fixed rates, and whether they're good for debt consolidation.
For the actionable details that matter most, you’ll want to read the rest of the post.
The Hidden Cost of Inaction
If you're carrying a $25,000 credit card balance at 25% interest and making minimum payments, you're looking at roughly $520 in interest charges every single month.
That's $6,240 per year – money that's literally disappearing from your pocket.
Now, if you could move that same debt to a HELOC at, say, 9% interest, your monthly interest drops to about $188.
That's a savings of $332 per month, or nearly $4,000 per year.
And here's the kicker – that HELOC interest is tax-deductible, so depending on your tax bracket, you're looking at even more savings.
This isn't just about the money – though the money matters. It's about the opportunity cost.
Every dollar you're paying in unnecessary interest is a dollar that could be invested, saved, or used to build real wealth.
The psychological benefit is huge too.
When you're managing a demanding career and trying to build wealth, carrying high-interest debt creates this underlying stress that affects everything.
Eliminating it gives you clarity and peace of mind that's hard to put a price on.
Credit Score Requirements: What You Need to Know
Let me be straight with you about credit scores for HELOCs.
There isn't some hard and fast rule that applies everywhere – it really depends on the lender.
But based on my experience, here's what you can generally expect:
If you're at 750 or above, you're going to get the best pricing available. You're in the sweet spot where lenders see you as their ideal customer.
At 720, you're in the second tier. Still good rates, still likely to get approved, but maybe not the absolute best pricing.
If you're in the 680-720 range, you're still in decent shape.
You have a high likelihood of getting approved, assuming all your other financial criteria meet their needs. The rates might be a bit higher, but you're still in workable territory.
Between 620 and 680, it's definitely going to get more difficult. It's going to depend on the bank and how flexible they are with credit scores.
And you're definitely going to be in the less attractive pricing tier.
Below 680? People start to get skeptical.
Something's up, and you're going to face tougher approval standards and higher rates.
Here's the thing about credit scores – when you need them, you need them to be good.
But most of the time, you're not thinking about them. It's easy to think they're somewhat inconsequential in your life until you need to make a major financial move.
If you're planning to pursue a HELOC but your score isn't where it needs to be, you can often improve it fairly quickly with some focused effort.
Pay down credit card balances to improve your utilization ratio, make sure all payments are current, and check for any errors on your credit report. A 90-day credit tune-up can often bump you up a tier or two.
Variable Rate Reality: What You're Actually Signing Up For
If you're going for a HELOC, you are pretty much always going to get offered a variable rate.
I've never heard of a fixed-rate HELOC. Maybe it exists somewhere, but it would be uncommon.
This is because a HELOC works kind of like a credit card – it's an open line of credit that you can draw money out of and then pay off.
But when you pay it off, the line doesn't close; the credit remains available.
The idea is that it's not a long-term permanent loan. You use it some, then maybe you pay it off, and your goal is to keep the balance low.
The variable rate structure typically works as prime rate plus a margin – usually prime plus one or prime plus two percent.
So if prime is at 7%, you might be looking at 8-9% on your HELOC.
Now, that variable rate could potentially make it not so good as a long-term borrowing instrument.
Rates can go up, and when they do, your payments go up with them. This is why I always stress that you should have a plan to pay off the HELOC as quickly as possible.
If you want fixed-rate borrowing against your home equity, there's an alternative: a home equity loan.
This is what people might historically call a “second mortgage.” It's not a line of credit – it's a lump sum of money they give you based on the remaining equity in your house.
Usually it's a 20, 25, or 30-year payoff with a fixed payment for that whole time, and it works the same way as your first mortgage.
But for the debt consolidation strategy we're talking about here, the HELOC's flexibility is actually an advantage.
You can pay it down aggressively without penalty, and if an emergency comes up, you still have access to that credit line.
The Debt Consolidation Strategy: Step-by-Step
Alright, let's get to the heart of this: using a HELOC to eliminate high-interest debt.
A lot of people get scared about using the equity in their house to pay off debt because they see the equity in their house as their long-term savings.
And that's true – there is a little bit of psychology there.
But ultimately, if you owe money on a credit card, when you do the math, your net worth is what it is.
If you can take some of your net worth from the home equity and pay off much higher interest debt over here, you're going to be saving a lot every month on interest.
And now the interest on the HELOC is tax-deductible.
So by and large, I say if you're carrying high credit card balances with very high rates – and we're talking 20 to 30% on credit cards today, which is insane – whereas on a HELOC you might have prime plus one or prime plus two (getting you in that 8-9% range).
Plus it's tax-deductible, so you have some extra savings there.
Here's my recommendation: take the equity, pay off the credit cards, and then work on paying off that HELOC as quickly as you can.
You'll be able to pay it down faster because it's accruing less interest every month.
Let me walk you through the practical steps:
First, do a complete debt inventory
List out every high-interest debt you have – credit cards, personal loans, whatever. Note the balance, interest rate, and minimum payment for each.
Second, calculate how much HELOC you need
Don't just borrow the maximum amount you qualify for. Borrow what you need to eliminate the high-interest debt, maybe with a small buffer for closing costs and unexpected expenses.
Third, prioritize your payoffs
Start with the highest interest rate debt first. This isn't about psychology or motivation – it's pure math. The highest rate debt is costing you the most money.
Fourth, set up automatic payments
… on your HELOC to ensure you never miss a payment. Missing payments on a debt secured by your home is not something you want to mess around with.
And finally, resist the temptation to use those paid-off credit cards.
This is where discipline comes in.
If you're the kind of person who's going to pay off the credit card debts and then rack them up again, or max out the HELOC on discretionary spending, then you need to think twice about this strategy.
Risk Management: Protecting Your Home and Financial Future
Let's talk about the elephant in the room: your home is collateral for this debt.
If you were to default on the HELOC, your home would be in danger of foreclosure. This is serious, and you need to understand this risk going in.
But here's the thing – if you can't pay your debts, you're going to be in financial trouble regardless of whether they're secured by your home or not.
The question is whether you want to pay 25% interest or 9% interest while you figure out your situation.
For someone with a six-figure income, the risk of not being able to make payments on a reasonably-sized HELOC should be relatively low, assuming you're not over-leveraging yourself.
But you should still plan for contingencies. Here’s how.
Keep your loan-to-value ratio conservative
Just because you qualify for a larger HELOC doesn't mean you should take it.
I'd suggest staying well below 80% combined loan-to-value when you factor in your first mortgage.
Maintain an emergency fund
Don't use every available dollar to pay down debt. You need liquidity for unexpected expenses or income disruptions.
Consider income protection
If your income depends heavily on bonuses, commissions, or business success, make sure you have adequate disability insurance and other protections in place.
Your 90-Day Implementation Plan
Here's how to execute this strategy efficiently:
Days 1-30: Preparation
- Pull your credit reports and address any issues
- Research lenders and get pre-qualified with 2-3 options
- Gather all necessary documentation (pay stubs, tax returns, property information)
- Calculate exactly how much you need to borrow
Days 31-60: Application and Approval
- Submit applications to multiple lenders to ensure competitive rates
- Respond quickly to any documentation requests
- Don't make any major financial changes during underwriting
Days 61-90: Execution and Setup
- Close on your HELOC
- Immediately pay off high-interest debts
- Set up automatic payments
- Create a tracking system to monitor your progress
A Word of Caution: Advanced Applications
Now, you might be thinking about other ways to use a HELOC – maybe for investments, business opportunities, or other financial strategies.
I want to address this briefly because I know high earners often think this way.
While there might be scenarios where using HELOC funds for investments could make sense mathematically, remember that you're dealing with variable rate debt secured by your home.
If rates rise significantly, or if your investments don't perform as expected, you could find yourself in a difficult position.
My strong recommendation is to focus on debt elimination as your primary goal.
Get rid of that high-interest debt, pay down the HELOC aggressively, and then consider other wealth-building strategies from a position of strength.
Common Mistakes High Earners Make
Let me share some mistakes I see people in your income range make with HELOCs:
Over-borrowing because you qualify. Just because the bank will lend you $100,000 doesn't mean you should borrow it. Take what you need and no more.
Treating it like permanent debt. A HELOC should be temporary. Have a plan to pay it off, and stick to that plan.
Getting caught up in rate timing. Don't wait for the “perfect” rate environment.
If you're paying 25% on credit cards and can get a 9% HELOC, that's a no-brainer regardless of what rates might do in the future.
Losing discipline. This is the big one. If you pay off your credit cards but then run them back up, you've just made your situation worse, not better.
The Bottom Line
Look, unless you're planning on not paying your credit cards off at some point – whether through bankruptcy or some other means – shifting your debt from high-interest credit cards to a lower-interest, tax-deductible HELOC makes mathematical sense.
You'll save money every month, you'll be able to pay off your debt faster, and you'll free up cash flow that you can use for wealth building.
For someone with a stable six-figure income, this can be a powerful tool for accelerating your financial progress.
But it requires discipline. It requires understanding what you're doing. And it requires treating your home equity with the respect it deserves.
The goal isn't to stay in debt forever – it's to optimize your debt structure so you can eliminate it as quickly as possible and move on to building real wealth.
If this kind of strategic financial thinking resonates with you, you might be interested in my Personal Finance Mastery course. It's designed specifically for people like you – those earning six figures who want to systematically build their way to seven figures.
The course covers the five areas that really matter: tracking your finances effectively (like what we've been discussing here), planning with business-style projections for your future, investing to multiply your money strategically, optimizing your earning potential over time, and retaining more of what you make through smart tax planning.
This isn't about get-rich-quick schemes or financial gimmicks. It's about understanding and systematically managing your money to build lasting wealth. If you're ready to take your financial game to the next level, check it out.