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Amid increasing living costs, homeowners are turning to home equity lines of credit (HELOCs) to tackle their growing debt. This resurgence in HELOC usage marks a notable shift after reaching post-crisis lows two years prior.

Historically used for home renovations, HELOCs are now popular for debt consolidation, according to mortgage lenders. Rochelle Adamson, a self-employed professional, successfully consolidated over $55,000 of credit card debt with a HELOC on her rental property last year. Adamson emphasized the seriousness of managing debt tied to one's home, contrasting it with the ease of using credit cards.

Today, homeowners face a paradox: record levels of home equity paired with rising consumer debt. Data from CoreLogic reveals the average home equity stood at $315,000, contributing to a total of $35 trillion in household equity by June's end. Meanwhile, national credit card debt climbed to $1.14 trillion, a 5.8% increase from the previous year, with auto loan debt also rising to $1.63 trillion.

Sarah Rose from Affinity Federal Credit Union noted the struggle many face with high-interest rates on credit cards and personal loans, suggesting debt consolidation via HELOCs as a viable solution. These loans typically carry interest rates averaging around 9%, compared to the over 21% interest rates on credit cards.

Adamson, residing in Honolulu, found HELOCs financially sensible. Her monthly credit card payments previously reached $3,200 without significantly lowering her debt, given interest rates between 18% and 22%. Her HELOC, with rates between 10% and 11.5%, allowed her to pay off approximately $20,000 in debt last year. She's now able to manage her balance with monthly payments of about $1,000 after an initial period of replenishing her emergency fund.

However, HELOCs come with risks, as they are secured against one's home, potentially resulting in property loss if payments are missed. Financial planner Gerika Espinosa recommends HELOCs for debt consolidation only when clients can manage their spending and avoid relying excessively on the credit line.

While HELOC usage is growing, it remains significantly lower than its peak during the financial crisis, when lenders extended over $700 billion in early 2009. Currently, around $379 billion is available. Non-bank lender Achieve, offering fixed-rate HELOCs since 2019, maintains stringent lending terms to ensure responsible use. According to Kyle Enright, Achieve's president of lending, none of their borrowers have lost their homes, highlighting the benefits of careful and conservative lending practices.

In summary, HELOCs offer a strategic option for homeowners dealing with debt, provided they manage the inherent risks responsibly.