Put down that credit card and tap into home equity instead

If the aggregate effects of inflation are putting pressure on your budget, you might be tempted to turn to credit cards to cover expenses. However, you're likely not making the most economical decision if you've owned your home for a while. Instead, a better option may be to tap your home equity, especially given high credit card interest rates, said Kurt Morris, manager of product strategy at BOK Financial®.

Home equity is the difference between what you owe on your house and what it is currently worth. On average, U.S. homeowners lost approximately $8,500 in equity during 2025, but they still had around $295,000 in accumulated home equity, according to the Cotality Homeowner Equity Report for the fourth quarter of 2025.

Home equity products, such as a home equity line of credit (HELOC), tend to have lower interest rates than other types of consumer debt, such as credit cards. For this reason, leveraging your home equity can be a good way to pay for expenses or to pay down more expensive debt, Morris said. Here are some possible uses:

Pay for school
You can use a home equity loan to cover educational expenses like university or trade school tuition, books and housing, or even to pay down student loans. However, the latter option should be considered carefully because you could lose federal forgiveness opportunities if you consolidate your debt in this way, Morris cautioned.

"Paying off student loans using home equity could provide lower interest rates and reduce the amount you pay overall," he explained. "However, you'll want to review both the risks and rewards before transitioning from student loans to home equity borrowing options."

To make an informed decision, be sure to review all federal student loan forgiveness programs you qualify for and how your private student loan rates are structured.

Pay down your credit card balances
The high interest rates that most credit cards charge can make it challenging to chip away at balances, so one option is to use a HELOC to pay down or consolidate this high-interest debt. Otherwise, you might be making credit card payments that mostly go towards paying the accumulated interest rather than the balances themselves. As Morris said, "Lowering your interest rate is critical for debt reduction."

Cover medical bills
Life happens and sometimes unexpected medical expenses come up. Hopefully, health insurance will cover some of the costs, but a HELOC can help cover your deductible and other out-of-pocket expenses. Even if you don’t have these additional medical expenses now but anticipate having them in the future, a HELOC can be opened proactively and only used as needed, Morris said. A HELOCs typically has an open period that extends quite a while–sometimes up to 10 years–before it closes. When you access funds from the line of credit for any purpose during that time, monthly payments will be required, and minimum payment amounts will vary based on the current interest rate.

Start a business
If you have a great business idea, but no start-up capital, you may want to consider using the equity you've built in your home to start or grow your own business.

Morris suggested starting by comparing a cash-out refinance with a small business loan to see which offers more benefits to you. Then, proceed with caution. If your business idea turns out to be a dud, you could lose the money and be left with no equity in your home.

Invest in property
You could also use a cash-out refinance or HELOC to help you buy an investment property or second home but there are some caveats.

"Second home-loan interest rates and investment property interest rates are higher than primary home rates, in most cases," cautioned Morris. "But suppose you have enough equity in your primary home to cover the cost of your second home or an investment property purchase. In that case, you can make a cash offer and avoid the higher interest rate and higher closing costs altogether."

Home renovation or repair costs
If a recent storm damaged your roof or you're looking to build a new home office but don't have cash readily available, then a home equity line of credit may be a good option. In fact, one of the most common uses for home equity is for renovations through a HELOC—and it may even help you save on your income taxes.

"In certain cases, interest paid on equity-related products could be tax deductible," said Morris. "It is always prudent to consult with a tax professional to review your individual tax situation as it relates to your home equity."

Borrowing against your home's equity to improve your space may also be worth it, especially if you love your location or moving is out of the question.

Home equity loan options

There are a few ways that homeowners can tap into their equity:

• HELOCs, which give you access to a line of credit that you can tap into as needed for a set duration of time called a draw period. HELOC interest rates are adjustable, meaning you may see increases or decreases over time, and the line of credit will show up on your credit report.
• Cash-out refinances: This option replaces your mortgage with a new one. You use the loan to repay the original mortgage, and the remaining cash is yours to do with as you please.

To know which option is right for you, Morris recommends working with a trusted lender to figure out how much equity you need in your home before you can borrow against it. "Each lender is different, but most require somewhere between 10% to 20% equity," he said. "Then choose the best equity option for you and review the rates, loan terms and other fees."

Then, how you use that money is largely up to you. "As long as it's legal, you can use the money for any purpose—whatever you want or need," he said. "Home equity gives you a lot of options."