The Math Behind Why You Should Use A 1st Lien HELOC to Consolidate Debt

Updated March 26, 2021 |

Debt Consolidation 101:

If you’re currently engaged in consumer debt, whether an auto loan, credit card, or appliance financing, you might be paying a money on interest calculated at a higher interest rate than what you would get with a 1st Lien HELOC.

If your credit card calculates interest at 17% annually, and you maintain an average daily balance of more than $1000, you would pay $170 throughout the course of the year in interest. But with a 1st Lien HELOC at 6.8%, that same debt would only cost you $68, or less than half. 

There are many other situations where these same rules apply. So why would you want to consolidate debt? To save money of course.


Why consolidate from a lower interest rate loan to a 1st Lien HELOC?

If you use the Maximized Cashflow Strategy  you could consolidate your debt to just your 1st Lien HELOC, and use your net income to rapidly pay down your principal balance. This would reduce the term of your loan, and ultimately, the amount of interest you would pay. 

Here is a side by side example:

Situation A:

Auto loan at 5% APY. $25,000 balance. If paying down $500 per month, the total interest paid on this vehicle would amount to:


Situation B:

Consolidate Auto loan at 5% APY, $25,000 balance to a 6.2% APY 1st Lien HELOC. Using the Maximized Cashflow strategy, you pay down $1250 per month, and only end up paying:


Of course, you could just maintain your lower interest rate loan and pay $1250 straight to it (as all your remaining net income). But you would need to pinch penny’s with your tight cashflow, and this would involve more management and budgeting than many people prefer. When a 1st Lien HELOC comes with an integrated sweep account, you don’t need to manage your in or out as tightly, as any remaining income automatically gets deposited against your principal balance every night. And any charges against the account will pull from equity automatically without any overdraft fees or insufficient funds notices.

Achieve Financial Freedom

Sign up on to get connected with a licensed lender who can deliver an all-in-one 1st Lien HELOC. They’ll walk you through the application process and help outline your budget, your numbers, and exactly how much you can save by replacing your mortgage.