There are smart ways to deal with credit card debt with interest rates that are often higher than 20%. These include cash-out refinancing, which replaces high-interest balances with lower mortgage rates, and targeted payoff methods like debt avalanche and debt snowball strategies. Home equity products offer homeowners unique benefits, such as much lower interest rates than credit cards. Balance transfers, on the other hand, give you 6 to 21 months of 0% interest to pay off your debt quickly. No matter which payoff plan you choose, making a budget that keeps track of your income and expenses will keep debt from coming back after you've worked hard to get rid of it.

Key Takeaways

• Cash-out refinancing combines high-interest debt into one lower fixed payment by replacing your current mortgage with a larger loan that gives you cash to pay off your credit card balances. This means that you will have to pay closing costs and have longer repayment periods.
• Home equity loans and HELOCs have lower interest rates than credit cards. HELOCs give you a revolving line of credit during draw periods, when you only pay interest on the amount you borrow. Home equity loans give you a lump sum with fixed monthly payments, and both are secured by your home.
• Balance transfers let you pay off your debt faster by giving you interest-free windows for 6 to 21 months at 0% rates. However, there are 3 to 5% transfer fees, and high rates start after the promotional period ends.
• The debt avalanche and snowball methods focus on one card at a time. The avalanche method focuses on the card with the highest interest rate first to keep costs low in the long run, while the snowball method focuses on the card with the lowest balance first to build psychological momentum through quick wins.
• Sustainable budgeting stops debt from coming back by keeping track of income and expenses to find ways to cut costs, make more money through side jobs, pay off debt with extra cash, and set credit card spending limits that keep balances low over time.

Credit card debt is a part of life for many people. Whether it's unexpected expenses or just a balance that grew over time, you're not alone in looking for ways to pay it down quickly. The good news? You have options to pay it down faster and regain financial peace of mind.

Making a payoff plan and sticking to it can help you tackle your bills and reduce your interest costs. In this article, we'll share how to pay off credit card debt and borrow responsibly.

1. Use a cash-out refinance to pay off debt

If you're a homeowner considering how to quickly pay off credit card debt, a cash-out refinance could be a smart move. This strategy replaces your existing mortgage with a new one for a higher amount, giving you a lump sum of cash that can be used to wipe out high-interest credit card balances. Since mortgage rates are typically much lower than credit card rates, this strategy can help you save money on interest while consolidating your debt into one manageable payment.

Pros:

• Take advantage of lower interest rates compared to credit cards
• One fixed payment instead of multiple balances
• Potentially improve your credit score by reducing your credit utilization

Cons:

• Only available to homeowners with enough equity
• Extends your mortgage repayment, which could mean more interest over time
• Closing costs may apply

2. Tap into your home's value

A home equity line of credit (HELOC) or home equity loan is another option for homeowners researching how to pay off credit card debt fast. HELOCs and home equity loans allow you to tap into your home's value to consolidate your high-interest credit card debt. Here's how it works:

• A HELOC is a revolving credit line that works like a credit card, allowing you to borrow as needed and pay interest only on what you owe during the draw period.
• A home equity loan, or second mortgage, is a lump-sum loan with a fixed or adjustable interest rate and predictable monthly payments.

Both options offer significantly lower interest rates than your credit cards.

Pros:

• Lower interest rates than credit cards
• Fixed or flexible repayment options depending on the loan type
• Lower your total monthly debt payments, freeing up cash for other uses

Cons:

• Requires home equity and isn't an option for renters
• May include closing costs or fees
• Debt is secured by your home
• A HELOC or home equity loan can help you pay off your credit card balances faster, but it's still a loan that needs to be repaid.

3. Consider a credit card balance transfer

Credit card balance transfers let you transfer the balance of your existing card to a new card with a low or 0% introductory rate, helping you pay it off interest free. The catch? The promotional period usually only lasts 6-21 months, so you'll need a plan to pay off the debt in full before the regular rate kicks in.

Pros:

• No interest for a set period
• Simplifies payments by consolidating debt

Cons:

• Balance transfer fees apply (typically 3% to 5%)
• High interest rates apply after the promo period

4. Target one credit card at a time

There are several ways to pay off credit card debt, but two of the most popular strategies are the debt snowball method and the debt avalanche method. While these techniques may not be fast, they can be very effective, and they both begin by targeting one credit card at a time.

The debt avalanche method targets your credit card debt with the highest interest rate to reduce your long-term costs. Each month, you'll make the minimum payment on all your other cards, then use any remaining funds to pay off as much of the highest-interest loan as you can. Once it's paid in full, move on to the credit card with the next-highest interest rate.

The debt snowball method prioritizes paying your smallest balance first. Each month, you'll make the minimum payment on all your other cards and put any remaining funds toward your smallest balance. When it's paid off, move on to the card with the next-smallest balance. This approach allows you to see your progress and build on the momentum of paying off your smaller loan balances.

Pros:

• Builds momentum and motivation

Cons:

• Takes time --- no instant results

5. Level up your budget

If you want to know how to pay off credit card debt --- and stay out of debt --- you'll need to start with a budget. Short-term fixes mentioned in our tips above can help, but without a solid financial plan, your credit card balances may creep back up.

Take the time to understand your income and expenses by tracking the money you earn and the money you spend. Once you can see exactly how each dollar is used, you can:

• Identify opportunities to cut back on your spending --- trim subscriptions, dine out less, or find other areas to save.
• Boost your income by taking on a side gig or negotiating a raise.
• Redirect any extra cash toward paying down existing credit card debt.
• Keep your credit card use in check by setting spending limits on discretionary expenses.

When you create a budget, you can set goals and see where you need to adjust to achieve them. A budget can help you set your priorities, save for them, and still set aside some money to do the things you love.

Choosing the best way to pay off your credit card debt

Paying off debt is personal, and the best strategy depends on your financial situation, preferences, and available resources. While homeowners might benefit from a cash-out refinance or home equity loan, others might find success with a balance transfer or adopting new budgeting strategies.

If you own your home and want to tackle high-interest credit card debt by consolidating debt with your home's equity, use our Cash-Out Refinance Calculator to see how much cash you could get, or speak to a Loan Expert to explore your options.