Should you use a home equity loan or HELOC to supplement your income? Here are 3 better alternatives

If you're worried about paying your bills – and if you've ever considered making extreme financial decisions to ensure they're settled – you're not alone. 

Sixty-three percent of all Americans are living paycheck to paycheck, according to CNBC and SurveyMonkey Quarterly Money Survey, released in July. Fifty percent of those respondents said they'd delay paying bills or utilities if there was a one-week holdup with their pay and 19% said they would have to take out a loan or use a credit card.

If you're a homeowner worried about paying bills on time, you may have thought about taking out a home equity loan or home equity line of credit (HELOC) to make sure your bills get paid. 

While these tools can be a great way to use the wealth you've built by owning your home, they can be very risky. Below, CNBC Select explores when you should borrow against your home, when you should avoid it, and alternative strategies.

HELOCs and home equity loans can be a great way to help you grow financially — but only when used in a financially safe and strategic way. That's even more important when you're already cash-strapped. 

Here is how each product works: 

• With a home equity loan, a lender provides you with a lump sum payment, backed by the value of your home, that you can use on whatever you'd like. You start paying the loan back, plus any interest, immediately. 
• With a HELOC, you open a line of credit secured by your home. You can take out as much money as you want, up to a maximum amount, during a draw period that typically spans 10 years. During this time, you'll only pay interest on what you take out. After that period ends, you no longer have access to the funds and must start repaying what you took out, plus interest, typically over a 20-year period. 

The stakes are high: if not managed properly, you could lose your home or seriously damage your finances. Here are three rules to help you decide whether borrowing against your home is the right choice. 

Rule 1: Only take out a HELOC or home equity loan if you know you can make punctual payments each month 

The first rule when taking on any kind of debt is to ensure you can make the minimum monthly payments on time and consistently, especially for a regular mortgage or a second mortgage — like a home equity loan or line of credit. 

That's because your house backs the financing, so a lender could force you into foreclosure if you fail to make punctual payments. Additionally, your credit score will take a hit if you miss a bill. 

You should not take out this kind of debt if you don't feel absolutely certain you'll be able to make the monthly payments. 

Rule 2: Only use a HELOC or home equity loan on something that could help you increase your net worth

If you can't afford to invest in something that may help you improve your financial situation down the road, a HELOC or home equity loan could help. In general, it's a good rule of thumb to use debt backed by your home's value for things that may help you grow your value. 

These are some of the few situations in which it may be smart to use a HELOC or another home equity product when you're financially strapped: 

• Completing home renovation projects
• Funding higher education 
• Starting a small business
• Safely investing money into the stock market
• Paying down high-interest debt so you'll pay much less in interest

To be sure, these situations are not always the smartest move for everyone. Be sure to consult a licensed professional before tapping into a key investment, like your house, to see if it's the best plan for you. 

Rule 3: Consider other options first

Finally, before you go straight to borrowing against your home, consider whether there is a better option. 

For example, if you're struggling to pay off high-interest debt, you may be better off with a debt consolidation loan. Or, you may be able to tackle a renovation with your savings or pay for college tuition with a low-interest student loan. 

Select walks you through alternatives in the sections below. 

If you're struggling to afford your regular expenses, there are steps to take before considering a home equity loan or HELOC. These solutions can be as simple as creating a strict budget or canceling subscriptions you're not using.

Create a budget and use an app

Start by taking a hard look at where your money is going — you may be surprised. 

The average American is paying $252 this year in unused subscriptions, per findings from YouGov that were published in CNET. Additionally, Americans paid $3,045 annually in 2025 on impulse purchases, according to Capital One Shopping Research, and $728 per year on food waste, according to the United States Environmental Protection Agency. 

From these categories alone, the average American could save $4,025 per year, or $335.41 per month, by creating and sticking to a budget that aims to eliminate such spending.

There are dozens of excellent budgeting apps on the market to help you plan and track your expenses. 

At Select, we love Rocket Money because it helps you easily identify subscriptions you're not using and cancel them for you. You can use its free version or its paid version, which has a "pay what you think is fair" model and typically costs users $7 to $14 per month. The cancellation service is only available with the paid version. 

PocketGuard is another great option, especially if you buy items impulsively. It helps you set up budgets for separate categories and, if you start overspending in certain areas, it will notify you. It offers a free version and a $12.99 monthly version that allows you to link an unlimited number of bank accounts and set up a debt payoff planner, among other features. If you pay annually, the total comes out to only $6.25 per month. 

Look for ways to save by installing coupon extensions

You can free up hundreds annually by installing coupon extensions. These are software programs that you upload to your browser or apps.

For example, if you rack up a large grocery bill every week, try Ibotta. It connects to over 300 retailers and claims to save users $15 to $30 per month. Download the app, select the products you plan to buy at the grocery store, and upload your receipt to receive cashback on eligible purchases. 

If you're struggling with debt, use a consolidation loan

If you're considering a HELOC or home equity loan to pay off debt, consider whether you can get a debt consolidation loan. 

These financing options typically have fixed minimum payments and lower rates than credit cards, so your debt won't feel so unpredictable and out of control. 

At Select, Upstart and SoFi are two of our favorite debt consolidation options. Upstart is great for those with poor credit, as it accepts applicants with low credit scores and no credit score at all. SoFi is best for people who need a large loan — its maximum amount is $100,000.

The data referenced in this article were results from the CNBC and SurveyMonkey Quarterly Money Survey released in July 2026.

Here is the methodology SurveyMonkey used to come to these findings: "This SurveyMonkey study was conducted June 15, 2026 to June 18, 2026 among a sample of 2,516 adults in the U.S. Respondents for this survey were selected from a non-probability online panel. The modeled error estimate for this survey is plus or minus 2.0 percentage points. Data have been weighted for age, race, sex, education, and geography using the Census Bureau's American Community Survey to reflect the overall demographic composition of the United States."

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At CNBC Select, our mission is to deliver high-quality service journalism and comprehensive consumer advice to our readers, enabling them to make informed financial decisions. Every personal finance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of mortgage products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content independently of our commercial team and any outside third parties, and we pride ourselves on maintaining high journalistic standards and ethics.

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