What Utah Homeowners Are Doing to Consolidate Debt

Credit card delinquencies in Utah are up 37% over the past year. Utah now ranks among the top five states in the country for credit card delinquency, and the average Utah household carries close to $12,000 in card debt. Statewide, that adds up to more than $11.5 billion owed on cards alone.

It's not just credit cards showing the strain. Lawsuits filed against Utahns over unpaid debt are up 23% since 2019, according to a recent Pew Charitable Trusts report picked up by Deseret News. If you've felt like your monthly bills stretch further than they used to, the data backs that up. It's not just you.

Why homeowners have an option renters don't

Credit cards are expensive money. The average credit card APR right now sits around 21%. If you're carrying a balance month to month, a big chunk of every payment is going straight to interest instead of the balance.

Homeowners have a lever that renters don't: home equity. Two ways to pull equity out for debt consolidation, both worth understanding before you pick one.

A HELOC (home equity line of credit) works like a credit card secured by your house. You draw what you need, when you need it, and only pay interest on what you've drawn. National average HELOC rates are running around 7.4% right now, well below what most credit cards charge.

A cash-out refinance replaces your current mortgage with a new, larger one, and you take the difference in cash at closing. Rates track close to standard mortgage rates, and it can make sense if you're also looking to change your rate or term anyway.

Either way, the math is the same idea: trade 21% debt for something closer to 7%, roll several payments into one, and stop bleeding money to interest every month.

This isn't a niche move anymore

According to Mortgage Bankers Association data, debt consolidation's share of home equity borrowing has climbed from 25% in 2022 to 39% in 2024, while home improvement's share has shrunk. Homeowners are increasingly tapping equity to deal with debt first, renovations second. Utah's numbers suggest more local homeowners are about to make that same move.

What lenders look for

Before you assume this works for your situation, here's roughly what qualifies:

• Credit score: most lenders want 680 or higher

• Home equity: typically 15 to 20% equity remaining after the new loan

• Debt-to-income ratio: most lenders cap around 43%, some allow more with strong compensating factors

A Loan Officer can run your actual numbers in about 15 minutes and tell you where you stand on all three.

The part that matters most

Your home is the collateral. Miss payments on a HELOC or a refinanced mortgage and the risk is real in a way credit card debt isn't. This only works as a long-term fix if the underlying spending habit gets fixed too. Consolidating debt onto your house and then running the credit cards back up is the one outcome that makes this whole strategy worse instead of better.

Done right, though, it's one of the most effective tools a homeowner has for getting out from under high-interest debt without touching retirement accounts or taking on a personal loan at double-digit rates.

Frequently Asked Questions

Is a HELOC or a cash-out refinance better for debt consolidation? It depends on your current mortgage rate and how much you need. If your existing rate is well below today's rates, a HELOC usually makes more sense since it leaves your first mortgage untouched. If you're already planning to refinance anyway, a cash-out refinance can combine both moves into one closing.

Will consolidating debt hurt my credit score? Short term, opening a new loan can cause a small dip. Medium term, paying off high credit card balances typically improves your credit utilization ratio, which is one of the biggest factors in your score.

How much equity do I need to consolidate debt this way? Most lenders want you to keep 15 to 20% equity in the home after the new loan, so the amount available depends on your current balance and your home's value.

Questions about whether this makes sense for your situation? Reach out before you make any moves.

Expect to close one week early.