How to consolidate debt as a Massachusetts resident

Whether it's a mortgage, student loans, credit cards or a car loan, taking on some debt can help you establish credit and build a solid financial foundation. However, too much debt can lead to stress and financial uncertainty. If you're a Massachusetts resident and have a share of the $18.39 trillion in U.S. consumer debt, you have options for consolidating what you owe to creditors and making payments more manageable. Taking advantage of your home equity is one of them. In 2024, 39% of Americans surveyed cited debt consolidation as the reason for borrowing against their home equity — up from 25% just two years prior.

Learn more about debt consolidation options below.

HELOC vs debt consolidation loan vs balance transfer credit card

When it comes to consolidating debt, you may have several tools available — each with its own advantages and drawbacks. The best option depends on your credit profile, income stability, debt amount, home equity and how disciplined you are with repayment. Three most common debt consolidation methods are home equity lines of credit (HELOCs), debt consolidation loans and balance transfer credit cards.

HELOC

What it is: A HELOC lets you borrow against the equity you've built in your home. Equity is the difference between your home's market value and the remaining balance on your mortgage. Homeowners who've paid off a significant portion of their mortgage may qualify to access this equity as a revolving line of credit.

How it works: A HELOC works like a credit card: You're approved for a maximum borrowing limit, and you can draw from it as needed. It typically comes with a variable interest rate that's lower than what you'd find on most credit cards or personal loans. Many homeowners use HELOCs to consolidate higher-interest debt, such as credit card balances or medical bills.

What to consider: Because your home acts as collateral, failing to repay a HELOC could result in foreclosure. It's important to borrow only what you can comfortably repay. While the flexibility and low interest rate can be appealing, the risks are high if you're not financially stable. Be cautious about using a HELOC for short-term relief if you don't have a long-term repayment plan.

Debt consolidation loan

What it is: A debt consolidation loan is a type of personal loan that combines multiple existing debts into a single new loan. Instead of juggling several balances, you make one monthly payment — usually at a fixed interest rate.

How it works: You apply for a loan equal to the total amount of debt you want to consolidate. Once approved, you use the funds to pay off your other debts. Moving forward, you only have to manage one payment, which may have a lower interest rate than your previous loans — especially if you have good credit. These loans are often offered by banks, credit unions and online lenders.

What to consider: Your credit score plays a major role in the interest rate you'll be offered. If your credit is poor, you might not qualify for favorable terms. Also, taking out a new loan can temporarily lower your credit score due to the hard inquiry. If you're planning to apply for a mortgage or car loan soon, that's worth considering.

Balance transfer credit card

What it is: A balance transfer credit card allows you to move existing credit card debt to a new card that offers a low — or even 0% — introductory interest rate for a limited period. It's a popular short-term strategy to reduce interest costs while you pay off credit card debt.

How it works: Once approved, you transfer balances from one or more high-interest cards to the new card. You'll then have a set period (often 6 to 21 months) to pay off the transferred amount interest-free. This can lead to significant savings if you pay the balance down quickly.

What to consider: These cards usually charge a balance transfer fee, often 3% to 5% of the amount transferred. More importantly, if you don't pay off the balance before the promo period ends, the interest rate can skyrocket — often higher than your original card. Be sure the math works in your favor, and that you have a realistic plan to pay off the full amount within the low or 0% interest window.

Debt management plan

If you don't qualify for a HELOC, debt consolidation loan or a balance transfer credit card, another way to consolidate debt is to work with a nonprofit credit counseling agency to create a debt management plan (DMP).

When creating a DMP, the credit counseling agency negotiates with your creditors to reduce your interest rates. You make a single monthly payment to the counseling agency, which then disperses it to your various debts. You don't have to take another loan. Along the way, you have support from certified counselors.

Enrolling in a DMP won't directly affect your credit score, but it may close your credit accounts and appear on your credit report, which could temporarily lower your score or impact your credit utilization. However, consistent on-time payments through the plan can help improve your score over time.

Should you decide to pursue a DMP, choose your agency with care. The agency should be a nonprofit, accredited and approved by Massachusetts.

Benefits of consolidating debt with a HELOC

A HELOC can be a powerful tool for consolidating high-interest debt — especially for homeowners with significant equity. Here are some of the main benefits of using a HELOC for debt consolidation:

• Lower interest rates: HELOCs typically offer much lower interest rates than credit cards or unsecured personal loans. Since the line of credit is secured by your home, lenders see you as less risky — passing on those savings through lower interest rates. This can significantly reduce the total interest you pay over time.
• Access to a large credit line: If you have substantial equity in your home, a HELOC gives you access to a much larger line of credit than most credit cards or personal loans. This makes it especially useful for consolidating larger debt loads spread across multiple accounts.
• Flexible repayment options: Unlike a fixed-term loan, a HELOC acts more like a credit card: You borrow only what you need (up to your limit) and pay interest only on the amount you use. This flexibility allows you to manage cash flow and pay off debt on your own timeline — although it's still wise to pay down the balance aggressively to save on interest.
• Simplified finances: Rolling multiple high-interest debts into a single HELOC can streamline your finances. Instead of juggling several payments with varying interest rates and due dates, you have one monthly payment — making it easier to stay on track and avoid missed payments.

While a HELOC offers many benefits, it's important to remember that it's secured debt — meaning your home is used as collateral. If you're not confident in your ability to repay the loan, this option carries significant risk. Used responsibly, however, a HELOC can be one of the most cost-effective ways to consolidate and eliminate debt.

Consider a HELOC to consolidate your debt

The debt consolidation strategy that will work for you depends on your income, credit score and your current debt-to-income ratio. If you own your home and have paid off part of your mortgage, a HELOC may be the way to go. Learn more about how it works and see your personalized HELOC rate today with no impact to your credit score.

Get My Offer