5 Things You Should Never Use a HELOC For

Quick Answer: A HELOC puts your home on the line. Some uses make sense — others lead to regret. Here are five things financial advisors wish their clients wouldn't finance with home equity.

---

The Uncomfortable Truth

HELOCs are marketed as flexible, low-cost borrowing. And they are — when used wisely.

But that flexibility is also dangerous. A HELOC makes it easy to borrow against your home for things that have no business being tied to your house.

Here are the five uses that lead to regret.

---

1. Depreciating Assets (Cars, Electronics, Furniture)

The trap: That 8% HELOC rate looks great compared to the dealer's 12% auto loan. So you finance your new car with home equity.

Why it's a mistake:

You're securing a depreciating asset with an appreciating one. Your car loses 20% of its value the moment you drive off the lot. It'll be worth half in five years. Meanwhile, you're still paying interest on the HELOC — potentially for a decade.

The math hurts:

• $35,000 car financed at 8% HELOC
• After 5 years: Car worth ~$14,000
• HELOC balance (if making minimum payments): Still ~$28,000
• You owe twice what the car is worth, secured by your home

Better alternatives:

• 0% dealer financing (if you qualify)
• Traditional auto loan (your home isn't collateral)
• Save up and pay cash
• Buy a less expensive car

---

2. Vacations and Lifestyle Expenses

The trap: "It's just a few thousand for this trip. The HELOC is right there. We deserve this."

Why it's a mistake:

You're putting your home on the line for memories. A vacation costs what it costs — adding years of interest payments makes it cost much more.

What people say on Reddit:

"I treated my HELOC like a credit card for two years. Now I have $40,000 in debt and nothing to show for it."

The math:

• $8,000 European vacation on HELOC at 8%
• Making interest-only payments during draw period
• After 3 years: You've paid $1,920 in interest... and still owe $8,000
• Total cost: Nearly $10,000+ for a trip you can barely remember

Better alternatives:

• Travel rewards credit cards (get points, pay off monthly)
• Vacation savings fund
• If you have to finance it, you can't afford it

---

3. Investment Speculation (Crypto, Meme Stocks, "Sure Things")

The trap: "The market's going up. I'll borrow at 8%, make 20%, and pay it back in a year."

Why it's a mistake:

You can't lose your house to a bad stock pick — unless you financed that stock with a HELOC.

Investments go down. Sometimes a lot. Sometimes fast. If you borrow against your home to invest, you've introduced the possibility of losing your home because of market volatility.

What happens:

• Borrow $50,000 from HELOC for crypto
• Crypto drops 40% (as it does)
• Portfolio worth $30,000, you still owe $50,000
• Now you're making payments on a massive loss
• Miss enough payments? Foreclosure risk

The sequence of returns risk:

Even if markets recover eventually, you're paying interest every month during the drawdown. And if you need to sell at the bottom to make HELOC payments, you've locked in your losses.

Better alternatives:

• Only invest money you can afford to lose
• Keep speculative investments separate from your home
• If you need leverage to invest, you probably shouldn't be investing that money

---

4. Keeping Up with the Joneses

The trap: "The neighbors just did their kitchen. Our house looks dated. Let's renovate."

Why it's a mistake:

Renovating for resale value can make sense. Renovating because you feel social pressure usually doesn't.

Questions to ask:

• Would I do this if my neighbors hadn't?
• Does this renovation add value, or just make me feel better temporarily?
• Can I afford the monthly payment comfortably?

The renovation FOMO cycle:

1. See neighbor's renovation
2. Feel inadequate
3. Borrow for your own renovation
4. Feel good for 6 months
5. Notice something else that needs updating
6. Repeat

Better alternatives:

• Renovate for YOUR needs, not comparison
• If you can't afford the monthly payment, save first
• Focus on maintenance over upgrades
• Remember: you live there, you don't live in their house

---

5. Debt Consolidation (Without Changing Behavior)

The trap: "I'll consolidate all my credit cards at 8% instead of 24%. I'll save thousands!"

Why it's sometimes a mistake:

Debt consolidation with a HELOC can be smart. But only if you address the behavior that created the debt.

The pattern that leads to disaster:

1. Max out credit cards ($30,000)
2. Consolidate with HELOC at lower rate
3. Feel relieved — credit cards are at zero!
4. Gradually start using credit cards again
5. Max them out again ($30,000)
6. Now you have $60,000 in debt — $30,000 secured by your home

The statistic that should worry you:

Studies suggest 40% of people who consolidate debt end up with MORE debt within 5 years. They didn't fix the underlying spending problem.

When consolidation DOES make sense:

• You've identified and addressed the behavior
• You cut up the cards (or at least freeze them)
• You have a budget and stick to it
• The debt was from a specific event (medical emergency, job loss) — not ongoing overspending

Better alternatives (if behavior is the issue):

• Address spending habits first
• Consider credit counseling
• Create an emergency fund to prevent future debt
• Consolidate only AFTER you've changed patterns

---

When HELOC IS the Right Choice

We're not anti-HELOC. We're anti-regret. Here's when HELOCs make sense:

✅ Home Improvements That Add Value

Kitchen remodels, bathroom updates, and structural repairs can increase your home's value. You're using equity to build more equity.

Learn more about HELOC for renovations

✅ Emergency Fund Backup

A HELOC you never draw is a safety net. It's there if you need it. Just don't tap it for non-emergencies.

More on HELOC as emergency fund

✅ Debt Consolidation WITH a Plan

If you've genuinely changed your financial behavior and have a clear payoff plan, consolidation saves real money.

Debt consolidation guide

✅ Large Necessary Expenses

Medical bills, education costs, or major repairs you can't delay — these are reasonable HELOC uses when the alternative is worse debt.

---

The Decision Test

Before using your HELOC, ask:

1. Is this building value or consuming it?
2. Would I be embarrassed to tell a financial advisor about this?
3. Will this still feel worth it in 5 years when I'm still paying for it?
4. Am I putting my home at risk for something temporary?

If any answer gives you pause, reconsider.

---

The HonestCasa Approach

We're not here to just approve loans. We're here to help you make good decisions.

If a HELOC isn't the right fit for your situation, we'll tell you. That's why we're called HonestCasa.

[Get an Honest Assessment →]

Not sure if HELOC is right for you? We'll help you figure it out — even if the answer is no.

---

Last updated: February 2026