Rocket Mortgage promotes home equity loans for credit card debt, but the strategy carries risks

As many Americans feel squeezed by higher costs at the grocery store and the gas pump, more households are turning to credit cards to cover everyday bills.

U.S. credit card balances rose to $1.263 trillion in the second quarter of 2026, up from $1.242 trillion at the start of the year, according to the latest consumer debt data from the Federal Reserve Bank of New York.

At the same time, many homeowners are sitting on substantial equity. Net mortgage equity reached $17.9 trillion in 2026, according to Cotality's Homeowner Equity Insights Report. That works out to about $310,500 in home equity for the average homeowner, with some states seeing much higher levels. That pool has grown as home values have climbed, and unlike renters, homeowners can borrow against it.

That backdrop has made home equity an appealing option for some borrowers looking to pay down debt. Rocket Mortgage, which led mortgage origination volume in 2025 and slightly outpaced United Wholesale Mortgage, has built a marketing campaign around that idea. It is far from alone: as higher mortgage rates have kept many owners from refinancing, home equity lending has become a growth area for lenders across the industry.

Home equity loans and home equity lines of credit, or HELOCs, often carry lower interest rates than credit cards, which averaged 23.80% in August 2026. But converting unsecured debt into secured debt comes with important trade-offs because the home is used as collateral.

Rocket Mortgage's campaign

Earlier in August, Rocket Mortgage launched a national advertising campaign that presents home equity loans as a way to deal with high credit card balances.

The commercials show homeowners losing sleep or avoiding their credit card bills, and pitch home equity loans as a way to "wipe out your high-interest credit card debt and make a fresh start." According to the company, the campaign will run through early 2027.

"Rocket used to be in the credit card business but left the sector to focus on helping clients build wealth instead of financing debt," Jonathan Mildenhall, chief marketing officer at Rocket Mortgage, said in a press release. "The truth of high-interest debt is something your credit card company doesn't want you to hear: the longer it takes to pay it off, the more money they make."

That dynamic is built into how card debt works: minimum payments are typically set at a small percentage of the balance, which can keep interest accruing for years on larger debts.

Rocket is now positioning home equity as a potential escape route. As of Aug. 19, the average home equity loan rate was 8.10%, while the average HELOC rate was 7.31%, according to Bankrate's latest survey of the nation's largest home equity lenders. That leaves a spread of more than 15 percentage points between the average credit card rate and a home equity loan, which is what makes consolidation attractive on paper: interest accumulates far more slowly at the lower rate.

"The equity they've built can break the cycle and potentially save them thousands of dollars," Mildenhall said in the release.

Why the strategy can be risky

Not all credit card debt comes from discretionary spending such as entertainment or vacations.

A survey by personal finance company Achieve found that 53% of American consumers are carrying a credit card balance to cover the rising cost of essential expenses. Among those respondents, 25% said they had been carrying that debt for six months or longer.

The survey also found that 48% of respondents "can't realistically reduce spending on their bills and utilities," suggesting many struggling households have already cut expenses as much as they can.

For those consumers, using home equity to pay off credit card debt may not solve the underlying problem. It can lower the interest rate, but it does not reduce the debt itself or necessarily address ongoing living costs.

How home equity loans and HELOCs work

There are two main ways to borrow against home equity.

A home equity loan provides a lump-sum payment that is usually repaid over five to 30 years. Borrowers must typically meet credit score and debt-to-income ratio requirements. These loans generally have fixed rates, which can make monthly payments easier to budget.

A HELOC works more like a revolving line of credit, similar to a credit card. The lender sets a borrowing limit, known as the maximum draw, based on a percentage of the home's value. HELOCs also have a draw period, usually lasting 10 years, during which most lenders require only interest payments.

Once the draw period ends, borrowers must begin making monthly payments on the remaining balance, which can be substantial if they have only made minimum payments during the draw period. Most HELOCs have adjustable rates, so payments can rise if interest rates increase.

The biggest difference from credit cards is that home equity loans and HELOCs are secured by the home itself.

If a credit card borrower defaults, the account can be closed, sent to collections, and potentially lead to legal action, while also damaging the borrower's credit score. But if a borrower cannot repay a home equity loan or HELOC, they could lose the home.

When it may make sense

Borrowing against home equity can make sense for homeowners who are confident they can repay the debt, especially if they are consolidating multiple balances at a lower interest rate.

It is much riskier when the money is being used to cover recurring essential expenses.

Alternatives to home equity borrowing

Borrowers who decide to tap home equity should compare rates, terms, and fees carefully and avoid borrowing more than necessary. It may also be worth considering a fixed-rate HELOC rather than an adjustable-rate product. Closing costs and other fees, which vary by lender, can also eat into the savings from a lower rate, especially on smaller balances or when the debt is repaid quickly.

Homeowners should also think about the possibility that property values could fall during a recession, a weak job market, or after an extreme weather event. In that case, a borrower could end up with negative equity, meaning the mortgage balance is higher than the home's value.

Less risky alternatives include a debt consolidation loan with a lower interest rate than credit cards but without home collateral, or a balance transfer card that offers 0% APR for a limited time.

Other options include the avalanche method, which targets the highest-interest debt first while making minimum payments on other balances, or the snowball method, which starts with the smallest debt and works upward.

Borrowers can also work with a nonprofit credit counseling agency to build a repayment plan without putting their home at risk.

This article originally appeared on Moneywise.com under the title: Rocket Mortgage pushes home equity loans to wipe out credit card debt — here's how that could backfire on homeowners.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.