Texans are carrying an average of nearly $7,000 in credit card debt, making the Lone Star State the seventh-worst in the nation for average credit card balances.
As many families struggle with high-interest debt, financial experts say one tool that often goes unused is a home equity line of credit, commonly known as a HELOC.
For many homeowners, home equity is their largest financial asset. Rising home values in recent years — including across the Houston area — have helped many homeowners build significant equity. Yet experts say very few Texans have tapped into that equity through a HELOC or second mortgage.
According to mortgage expert Charles Villafana, about 98% of Texans who own their homes mortgage-free have never opened a HELOC or second mortgage.
A HELOC allows homeowners to borrow against the equity they’ve built in their home. Because the loan is secured by the property, interest rates are typically much lower than those charged on credit cards.
The current average HELOC interest rate nationwide is about 7.4%, compared with credit card interest rates that often exceed 20%.
For homeowners carrying thousands — or even tens of thousands — of dollars in high-interest credit card debt, using a HELOC to consolidate those balances could reduce monthly interest costs and help pay off debt faster.
However, financial experts caution that taking out a HELOC is a major financial decision.
Unlike credit card debt, a HELOC is secured by your home, meaning you could risk foreclosure if you’re unable to make payments. Homeowners should carefully weigh the risks and benefits and speak with a trusted financial advisor before taking out any home equity loan.
Villafana says a HELOC can be a useful financial tool when used responsibly, particularly for homeowners looking to pay down high-interest debt, but it should be part of a broader financial plan rather than a quick fix.