Should you use a HELOC for debt consolidation? | nbkc

The benefits and risks of debt consolidation with a home equity line of credit.

What is a Home Equity Line of Credit (HELOC)?

A Home Equity Line of Credit — HELOC for short — is a loan a homeowner can take out, borrowing money against the equity they’ve built up in their home. There is money in the walls, so to speak.

A HELOC functions like a revolving line of credit, letting you borrow money again and again up to a certain amount. This type of loan has variable interest rates — and, might we add, nbkc offers a very warm and welcoming introductory rate for our HELOC.¹

There are two windows in the life of every HELOC.

Window 1: The Draw Period.

The nbkc HELOC offers a 7-year Draw Period.

During this window, draw funds as you need them — up to your limit, of course. Pay it back and borrow again and again until the draw period ends. You only pay interest on the amount borrowed.

Window 2: The Repayment Period.

The nbkc HELOC offers a 13-year Repayment Period.

This is when you repay the money you drew during the Draw Period plus interest. You’ll make monthly principal and interest payments until your balance is cleared.

Benefits of Using a HELOC for Debt Consolidation

Scaling a mountain of debt can feel like, well, scaling an actual mountain — especially when you’re dealing with debt at a high-interest rate. Take some deep breaths and let’s look at why choosing an nbkc HELOC to consolidate your debt could help you conquer the climb.

Reason 1: Give yourself a lower interest rate

Most homeowners who take out a HELOC for debt management do it for a lower interest rate.

Credit card interest rates are notoriously high — sometimes in the 20-30% range.²

A HELOC, on the other hand, offers significantly lower rates.¹ Yes, a HELOC has variable rates but you’re still looking at a typically lower rate1 than that of a credit card² even with potential fluctuations in market.

By consolidating debt into a HELOC with a lower interest rate than your current debt, you’ll save on monthly interest payments.

Translation: Pay down your debt faster while paying less overall.

Reason 2: Streamline your monthly payments.

If you’ve got a handful of debt payments with different due dates, the odds increase for you to drop one of those spinning plates. But, fear not, for you could use an nbkc HELOC to bring all your debt together into one single payment.

No more keeping track of several bills. Just one consistent monthly payment to keep top of mind.

Translation: One payment makes for easier budgeting and less potential late fees.

Types of Debt a HELOC Would Be Appropriate For

What kind of debt can you consolidate with a Home Equity Line of Credit? The short answer: most. The longer answer: read on, dear reader.

Credit Card Debt

We mentioned this a few paragraphs above, but the primary debt homeowners consolidate with a HELOC is high-interest rate credit card debt.²

The lower — yes, variable but still lower — interest rate of a HELOC¹ means significant long-term savings. And, paying off debt faster.

Personal Loans

Do you have personal loans? Do those personal loans have higher interest rates than what you could snag with a HELOC? Do you want to lower your monthly payments and total interest you’ll owe over the life of your debt?

If you nodded your head throughout that line of questioning, a HELOC could be the fourth head nod.

High-Interest Loans

Personal loans may give you cash fast, but the tradeoff is their interest rates and fees are typically unreasonably high.

These quick-fix loans are sometimes exactly what you need in the moment. But, beware. Short-term. High-cost.

Once the dust has settled, you may want to consider a HELOC to pay off unsecured personal loans.

Okay, so what are these low rates we keep talking about?

While most HELOCs offer lower interest rates than all of the debt mentioned above, nbkc offers an even friendlier, warmer introductory rate along with a competitive thereafter rate.¹

Check out the current rates of an nbkc HELOC.¹

Risks of a HELOC (and Considerations)

Like with most loans, there are risks with a HELOC. They’re to be taken seriously, but if you consider your financial state and stay on top of payments, an nbkc HELOC could be quite the savvy move.

Risk: Your home is used as collateral.

A HELOC sounds great, but how risky is it exactly? As long as you pay back the HELOC, you’re in the clear. Since you’ve put your house up as collateral, failing to repay the loan could result in foreclosure.

Consideration: Only take out what you feel confident you can repay. The repayment period won’t kick in for seven years, but consider what you could afford now.

Risk: Interest rates are variable and carry potential payment fluctuations.

Anywhere you get one, a HELOC is an adjustable rate product.¹ At nbkc, your rate is Wall Street Prime +1%. When adjustments are made to the prime rate, you will see those changes affect your next billing cycle. The long and short of it is that your monthly payments could change depending on whether the rate has changed.

Consideration: Look at the variations in rate over the past 30 years and see if that’s something you feel comfortable keeping up with.

Risk: Taking on new debt adds to your overall debt load.

When you add a HELOC into the mix, you increase your overall debt. This isn’t a red flag necessarily unless you’d be piling onto an already large pile of debt. That being said, if you do have a lot of debt floating around, you could consider using the HELOC as a way to consolidate that debt.

Consideration: Review your current debt and make an educated decision. If you’re unsure whether or not your debt can take on more, speak to a financial advisor.

How to Determine if a HELOC is Right for You

Taking out a loan this large can be daunting. Scary, even. But, by following a few simple steps, you can figure out whether a HELOC is the right move for you right now. As always, if you have any questions, don’t hesitate to reach out to one of us humans at nbkc.

Assess your financial situation.
Evaluate the money you make, the money you spend and any existing debt. Crunch some numbers to make sure you feel comfortable making new payments in addition to any you already make for your car or student loans or credit cards.
Evaluate your home's equity
Much like mortgage lenders have their nifty loan-to-value ratio calculation, we’ve got an equally nifty calculation for your potential line of credit.

As an example, let’s say you own a home valued at $500k and you still owe $300k on your mortgage.

nbkc can loan up to 85% of your home’s value.

$425,000 (85% of home’s value)
-$300,000 (mortgage balance)
$125,000 Potential line of credit from nbkc
Consult with a financial advisor
Debt isn’t something to play around with. A financial advisor will walk you through the implications of a HELOC on your current finances and your future financial goals.

They’ll help you figure out what monthly payment would be feasible for you to pay back when the time comes.

Looking to lump your debt into one pile instead of several?

Lower interest could be what helps you get out of debt faster. The nbkc HELOC offers a warm introductory rate¹ and an even warmer human being guiding you throughout the process.

Get today’s rates¹

¹APR = Annual Percentage Rate. Offer is not available in the state of Texas or in Puerto Rico, Guam, US Virgin Islands, American Samoa, or Commonwealth of the Northern Mariana Islands. Loan approval and loan amount is subject to underwriting, credit qualifications and bank-determined property value through a desktop appraisal. Property ownership and property type restrictions may apply. nbkc bank does not offer HELOCs for second residences. Rates and offer may change or be discontinued at any time and without notice. Rates are based on the Prime Rate published in the Wall Street Journal plus margin but will never exceed 18% APR. Rates as of 04/25/2025. Consult a tax advisor regarding the deductibility of interest. nbkc bank customers are eligible for bank-paid third-party fees up to $1,000. Borrowers must pay all third-party fees exceeding $1,000 at closing. If a HELOC is modified or refinanced, the borrower does not qualify for bank-paid fees or the introductory rate. The introductory rate is given once per the life of loan on a residence. Minimum loan amount of $25,000.

²Federal Reserve as reported by Forbes , as of March 2025