Dave Ramsey’s Take on Home Equity Loans and HELOCs

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Updated Dec 12, 2024

5-min read

Written by Taylor Milam-Samuel

Written by Taylor Milam-Samuel

Expertise: Student loans, credit cards, debt, budgeting

Taylor Milam-Samuel is a personal finance writer and credentialed educator who is passionate about helping people take control of their finances and create a life they love. When she's not researching financial terms and conditions, she can be found in the classroom teaching.

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Reviewed by Erin Kinkade, CFP®

Expertise: Insurance planning, education planning, retirement planning, investment planning, military benefits, behavioral finance

Erin Kinkade, CFP®, ChFC®, works as a financial planner at AAFMAA Wealth Management & Trust. Erin prepares comprehensive financial plans for military veterans and their families.

Learn more about Erin Kinkade, CFP®

Dave Ramsey is a well-known personal finance expert who is staunchly against borrowing money, including through home equity loans or HELOCs.

Ramsey says he would never recommend a home equity loan or line of credit. While Ramsey acknowledges some potential benefits, he believes the risks—including putting your home at stake—far outweigh any advantages. Below, we’ll dive into his perspective, explain why he discourages these loans, and explore alternatives he recommends.

Table of Contents

Why Dave Ramsey advises against home equity loans and HELOCs

Dave Ramsey is clear in his stance: He doesn’t recommend home equity loans or HELOCs under any circumstances. Ramsey says in the video below that they are “the credit cards of the mortgage world.”

He explains that most of these products have an annual or biannual “call” that allows the lender to demand that you repay the full amount you owe—meaning you must have the cash to repay, take out another loan, or have your home foreclosed.

You know what a home equity loan is? It’s a good chance for you to lose your home.”
Dave Ramsey

He also points out that most HELOCs have variable interest rates—and that the rate changes “based on the banker’s whim.”

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Ramsey argues that relying on debt—even at the lower rates—keeps you from building true financial security. Instead, he stresses the importance of living within your means, saving for large expenses, and avoiding debt altogether.

Is a Home Equity Loan a Good Idea?

What if I want to use a HELOC for renovations?

Ramsey advises against using a HELOC or home equity loan for typical expenses, such as home renovations. He tells a caller in the video below: “We’re not in the home equity loan business around here. We’re in the get-out-of-debt business.”

No, we don’t tell you to take out a home equity loan—ever. We’ve never done that one time in 30 years.
Dave Ramsey

Other HELOC uses Dave Ramsey advises against

Retirement costs: Ramsey advises saving for retirement ahead of time. If you opt for a HELOC or home equity loan instead, he explains, you could be in debt for the rest of your life.
Significant expenses: Large expenses, such as college tuition for children, are prevalent reasons to get a loan or line of credit. Dave Ramsey advises saving cash for expenses instead.
Debt consolidation: As a proponent of living debt-free, his advice about using a HELOC or home equity loan for debt consolidation follows suit. He says the goal is to eliminate debt, not add more—regardless of the potential savings from a lower interest rate.
Emergencies: Ramsey advises saving a separate emergency fund for unforeseen expenses. He does not advocate using a HELOC or home equity loan in emergencies.

Dave Ramsey on the risks of HELOCs and home equity loans

Ramsey is vocal about the risks of a HELOC or home equity loan. He says to consider the following risks.

You could lose your home: A HELOC and home equity loan are secured loans, and your home is the collateral. If you default, the lender could take your home. Ramsey says it’s never worth the risk: “As long as you owe money on your house, you’re at risk of losing the roof over your head.”
You pay extra due to interest: Interest is the price you pay to borrow money. Interest rates fluctuate depending on the market and lender, but the loan will always have an interest rate. According to Ramsey, “you’ll pay interest out the ears,” so it’s better to avoid it and focus on saving for expenses.
It’s not a quick fix: You might be able to access the funds from a HELOC or home equity loan in a few weeks, but you could pay it back for decades. So it’s wise to consider how it might affect your finances over the long term. As Ramsey Solutions puts it, “We’ve never talked to a millionaire who got rich by borrowing against their home’s equity.”
Extended repayment terms: HELOCs and home equity loans often have extended repayment terms of up to 30 years. The long repayment terms could lead to paying more interest fees. You won’t be debt-free for decades.

What does Dave Ramsey recommend as HELOC alternatives?

Because Dave Ramsey is anti-debt in all circumstances, he recommends saving for the expense you plan to use a home equity loan or HELOC for.

In the video above where the caller asked whether using a HELOC for major home renovations makes sense, he recommended that the caller pay off his remaining debt and then instead break up a $50,000 renovation into smaller projects and complete each project as he saves up the amount needed.