Safer Options Than a Cash Out Refi To Eliminate High-Interest Debt
Written by
John Schmoll
Edited by
Zuri Anderson
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The economy is posing problems for many Americans. Inflation has remained stubborn for months, and a growing number of Americans are struggling with rising credit card debt. The number of Americans making less than the minimum payment required rose from 8% to 13% in 2025 alone, according to the National Foundation for Credit Counseling.
Worse yet, more Americans are turning to their homes to pay off debt through cash-out refinances. Cash-out refinances account for 59% of all refinance transactions in the second quarter of 2025 alone, according to ICE Mortgage Technology. Of those, 70% accepted a higher interest rate and saw their monthly payments increase by nearly $600.
Not only does this cause Americans to lose equity in their homes, but it also puts their homes at risk if they miss payments. Fortunately, there are relatively safer options to cash-out refinances to erase high-interest debt.
Balance Transfer Credit Card
For Americans with good credit, a balance transfer credit card can be an effective alternative to a cash-out refinance. Balance transfer cards allow you to get a 0% APR for up to 21 months, giving you time to attack the debt with no interest.
The catch is that if you don’t repay the indebtedness within that timeframe, most credit card issuers retroactively attach interest to the entire transfer amount. And, many cards charge a transfer fee of 3% to 5% of the amount you transfer. Those two aside, if you’re committed to breaking the cycle of indebtedness, a balance transfer card can be a powerful tool that doesn’t put your home at risk.
Home Equity Loan
If you want to use your home equity to erase debt, a home equity line of credit (HELOC) can be a safer alternative to a cash-out refinance. The two tools differ in one specific way.
A HELOC lets you borrow as you have need, traditionally at a variable interest rate. It acts as a line of credit. A cash-out refinance replaces your original mortgage with a larger one, often at a fixed rate, allowing you to get the difference in cash, in one lump sum.
Interest rates are typically higher on a HELOC, but you only access funds as you have need. Your home is still collateral, so it’s wise to use this option only if you have a repayment plan in place.
Debt Consolidation Loan
One common challenge in dealing with credit card debt is managing multiple cards. A debt consolidation loan can be a helpful way to combine multiple debts into a single loan.
Credit counselors are often able to negotiate lower interest rates than you’re currently paying, allowing your payments to be more effective. Additionally, a debt consolidation loan doesn’t use your home as collateral. Be aware that fees may apply to these loans, and if you don’t fix overspending habits, you could end up in a worse situation.
Rework Your Budget
Analyzing your budget is always a good first step when dealing with high-interest debt. Solving the issue overnight isn’t realistic, but an honest review of spending can have a powerful impact over the long term.
Review your spending and identify opportunities to cut back on wasteful spending, then use excess funds to pay down debt, using either the debt snowball or debt avalanche method. Don’t overlook using extra income, such as tax refunds, to pay off the debt further. Budgeting takes time, but for Americans wanting to protect their homes and improve their finances in the long term, it’s often best.
Paying off mounting credit card debt is challenging, especially in the current economic headwinds. It’s wise to contemplate all of your repayment options before putting your home at risk.
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