Debt Consolidation Loan vs. Home Equity Loan

Two Paths to One Payment

When someone is juggling multiple debts with different rates and due dates, consolidation starts to look appealing. The two most common vehicles are unsecured debt consolidation loans and home equity loans. They solve the same surface problem — too many payments — but they work very differently under the hood.

Debt Consolidation Loans

These are unsecured personal loans. You borrow a lump sum, pay off your existing debts, and make one fixed monthly payment at a single interest rate. Rates typically range from 6% to 36% depending on credit score and lender. The advantage is simplicity and no collateral risk. The downside is that borrowers with lower credit scores may not get a rate that saves money.

Use the Consolidation Calculator on DebtCalc to enter your current debts — balances, rates, and minimum payments — then compare them against a consolidation loan offer. The calculator shows total interest paid under both scenarios.

Home Equity Loans

These are secured by your house. Because the lender has collateral, rates are typically lower — often 7–9% in the current environment. The risk is real: if you default, the lender can foreclose. You're converting unsecured debt into secured debt, which changes the stakes entirely.

Home equity loans also come with closing costs, appraisal fees, and longer processing times. They make the most sense for larger debt amounts where the rate savings justify the fees and the risk.

Which Makes More Sense?

The Consolidation Calculator lets you model both options side by side. Compare monthly payments, total interest, and payoff timelines.

If your total debt is under $15,000 and your credit qualifies you for a reasonable personal loan rate, the consolidation loan is usually simpler and safer. If you're carrying $30,000+ and your home has significant equity, the home equity route may save thousands — but only if you won't rack up new debt on the now-empty credit cards.